Does Fly Fitness have the option to assume the lease for the Franchised Business location?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
CONDITIONAL ASSIGNMENT OF LEASE
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns and transfers to Fly Fitness Franchise, L.L.C., address of 201 North 13th Street, Suite 1A, Lincoln, Nebraska 68508 ("Assignee"), all of Assignor's right, title, and interest as tenant in, to and under that certain lease, a copy of which shall be attached hereto (the "Lease") respecting premises commonly known as a Nebraska limited liability company, with a notice This Assignment is for collateral purposes only and except as specified herein, Assignee shall have no liability or obligation of any kind whatsoever arising from or in connection with this Assignment or the Lease unless Assignee takes possession of the premises demised by the Lease pursuant to the terms hereof and assumes the obligations of Assignor thereunder.
Assignor represents and warrants to Assignee that Assignor has full power and authority to so Assignor's interest in the Lease or the premises assign the Lease and Assignor's interest therein and that Assignor has not previously assigned or transferred, and is not obligated to assign or transfer, any of demised thereby.
Upon a default by Assignor under the Lease or under the franchise agreement for a Fly Fitness outlet between Assignee and Assignor (the "Franchise Agreement"), or in the event of a default by Assignor under any document or instrument securing the Franchise Agreement, Assignee shall have the right and is hereby empowered to take possession of the Premises demised by the Lease, expel Assignor therefrom, and, in such event, Assignor shall have no further right, title or interest in the Lease.
Assignor agrees that it will not suffer or permit any surrender, termination, amendment, or modification of the Lease without the prior written consent of Assignee.
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 option to assume the lease for the franchised business location under certain conditions. Specifically, the franchisee (Assignor) assigns their rights, title, and interest in the lease to Fly Fitness Franchise, L.L.C. (Assignee) through a Conditional Assignment of Lease agreement. This assignment serves as collateral. Fly Fitness has no obligations related to the lease unless it takes possession of the premises.
This conditional assignment becomes relevant if the franchisee defaults under the lease or the franchise agreement. In the event of a default, Fly Fitness is empowered to take possession of the premises, effectively expelling the franchisee. Consequently, the franchisee loses all rights, title, and interest in the lease. The franchisee also agrees not to alter the lease terms without Fly Fitness's written consent.
For a prospective Fly Fitness franchisee, this means that while they initially secure and manage the lease for their business location, Fly Fitness retains the right to step in and assume the lease if the franchisee fails to meet their obligations. This provides Fly Fitness with a mechanism to maintain control over the location and ensure business continuity in case of franchisee default. The franchisee should fully understand the conditions under which Fly Fitness can exercise this right and the implications of such an action.
This arrangement is not uncommon in franchising, as it protects the franchisor's brand and network by allowing them to maintain control over key assets like the business location. However, franchisees should carefully review the terms of the lease and the franchise agreement to understand their rights and obligations, as well as the circumstances that could trigger the conditional assignment of the lease to Fly Fitness.