Can Fly Fitness operate acquired businesses under different marks after a merger or acquisition?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees that Franchisor has the right, now or in the future, to purchase, merge, acquire or affiliate with an existing competitive or non-competitive franchise network, chain or any other business regardless of the location of that chain's or business' facilities, and to operate, franchise or license those businesses and/or facilities operating under the Marks or any other marks following Franchisor's purchase, merger, acquisition or affiliation, regardless of the location of the facilities (which Franchisee acknowledges may be within the Territory, proximate thereto, or proximate to any of Franchisee's locations).
However, Franchisor represents that it will not convert any such acquired facilities that are operating within the Territory to a Fly Fitness franchise during the Term of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, Fly Fitness has the right to purchase, merge, acquire, or affiliate with other businesses, including competitors. Following such actions, Fly Fitness can operate, franchise, or license these acquired businesses under the Fly Fitness marks or other marks. This applies regardless of the location of the acquired facilities, even if they are within or near a franchisee's territory. However, Fly Fitness states that it will not convert any acquired facilities operating within a franchisee's territory to a Fly Fitness franchise during the term of the franchise agreement.
This clause gives Fly Fitness considerable flexibility in expanding its business through acquisitions and mergers. It also allows them to operate acquired businesses under different brands, which could be beneficial in maintaining existing customer bases or exploring new market segments. However, for franchisees, this means that Fly Fitness could potentially operate competing businesses near their locations under different brand names, although they cannot convert those businesses to Fly Fitness franchises within the franchisee's territory during the agreement term.
This is a fairly standard practice in franchising, as it allows the franchisor to grow and adapt to market changes. However, prospective franchisees should carefully consider the implications of this clause, particularly the potential for competition from businesses affiliated with Fly Fitness but operating under different marks. It would be prudent to discuss this aspect with Fly Fitness during the due diligence process to fully understand the potential impact on their franchise.