Is a transfer of stock in the Fly Fitness franchisee considered a Transfer?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
A transfer of any stock in the Franchisee if it is a corporation or a transfer of any ownership rights in Franchisee if it is a partnership, a limited liability company or limited partnership shall be considered a Transfer restricted hereunder.
If Franchisee has complied fully with this Agreement and subject to Franchisor's Right of First Refusal set forth in Section 16.6, Franchisor will not unreasonably withhold its consent of a Transfer that meets, to Franchisor's satisfaction, the following requirements:
- 16.3.1.
The proposed transferee and all its principals must have the demeanor and be individuals of good character and otherwise meet Franchisor's then-applicable standards for franchisees.
- 16.3.2.
The transferee must have sufficient business experience, aptitude, and financial resources to operate the Franchised Business and to comply with this Agreement;
- 16.3.3.
The transferee has agreed to complete Franchisor's Initial Training Program to Franchisor's satisfaction;
- 16.3.4.
Franchisee has paid all amounts owed to Franchisor and third-party creditors;
- 16.3.5.
The transferee has executed Franchisor's then-standard form of Franchise Agreement, which may have terms and conditions different from this Agreement, except that the transferee shall not be required to pay the Initial Franchise Fee;
- 16.3.6.
Franchisee and the transferee and each of Franchisee's and the transferee's Principals shall have executed a general release under seal, in a form satisfactory to Franchisor, of any and all claims against Franchisor and Franchisor's officers, directors, shareholders, members and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules and ordinances.
Franchisee will agree to subordinate any claims Franchisee may have against the transferee to Franchisor, and indemnify Franchisor against all claims brought against Franchisor by the transferee for a period of three (3) years following the transfer;
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, a transfer of stock in a Fly Fitness franchisee, if the franchisee is a corporation, is considered a Transfer. Similarly, if the franchisee is a partnership, limited liability company, or limited partnership, a transfer of any ownership rights is also considered a Transfer.
This means that if a franchisee wishes to sell or transfer their stock or ownership rights, they must obtain prior written consent from Fly Fitness. If a transfer occurs without this approval, Fly Fitness has the right to void the transfer. This provision allows Fly Fitness to maintain control over who owns and operates its franchises, ensuring that new owners meet their standards.
Fly Fitness will not unreasonably withhold consent of a transfer if the franchisee has complied with the agreement and Fly Fitness's right of first refusal is accounted for. The proposed transferee and their principals must meet Fly Fitness's standards for franchisees, possess sufficient business experience and financial resources, and agree to complete the initial training program. Additionally, the transferee must execute Fly Fitness's current standard franchise agreement and provide a general release of claims against Fly Fitness. The franchisee must also agree to subordinate any claims against the transferee to Fly Fitness and indemnify Fly Fitness against claims brought by the transferee for three years following the transfer.