Can Fly Fitness operate other kinds of businesses within a franchisee's territory?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
We reserve all rights not expressly granted in the Franchise Agreement. For example, we or our affiliates may own, operate, or authorize others to own or operate Fly Fitness outlets outside of the Territory and may operate other kinds of businesses within the Territory. Although we do not currently do so and have no plans to do so, we and our affiliates may own, acquire, conduct, or authorize others to conduct, any form of business at any location selling any type of product or service not offered under the Marks, including a product or service similar to those you will sell at your Franchised Business. We reserve the right to merge with, acquire, or be acquired by, an existing competitive or non-competitive franchise network, chain, or other business; however, we will not convert any acquired business in your Territory to a franchise using our primary trademarks during the Term of your Franchise Agreement.
Source: Item 12 — TERRITORY (FDD pages 29–31)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, Fly Fitness retains significant rights within a franchisee's territory. While franchisees receive a territory, it is not exclusive. Fly Fitness explicitly reserves the right to operate other kinds of businesses within the territory, even those that might offer similar products or services. This means that even though a franchisee is operating a Fly Fitness outlet, Fly Fitness or its affiliates could potentially run a completely different type of business within the same territory, offering similar or different products. Fly Fitness also retains the right to sell products and services under the Fly Fitness brand through alternative distribution channels such as retail outlets, grocery stores, airports, malls, and the Internet.
This reservation of rights has important implications for prospective franchisees. The lack of an exclusive territory and the possibility of Fly Fitness operating other businesses nearby could lead to increased competition and potentially impact the franchisee's revenue. The franchisee will not receive any compensation for sales that Fly Fitness makes through these alternative distribution channels within their territory.
Fly Fitness does commit that it will not open another Fly Fitness outlet or grant the right to anyone else to open a Fly Fitness outlet within the Territory during the term of the Franchise Agreement, provided the franchisee is not in default. However, this limited protection does not extend to other types of businesses or alternative distribution channels. Franchisees should carefully consider these factors and evaluate the potential impact on their business before investing in a Fly Fitness franchise.
Prospective franchisees should inquire about Fly Fitness's specific plans for alternative distribution channels and other business ventures within their target territory to fully understand the competitive landscape. Understanding these potential competitive pressures is crucial for making an informed investment decision.