What obligations survive the termination or expiration of a Fly To Fit franchise agreement?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
est to, or is convicted of a felony; or
- (xiv) Franchisee or any Owner is accused by any governmental authority or third party of any act, or if Franchisee or any Owner commits any act or series of acts, that in Fly To Fit Franchise's opinion is reasonably likely to materially and unfavorably affect the Fly To Fit brand.
- 14.3 Effect of Termination. Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:
- (i) pay all amounts owed to Fly To Fit Franchise based on the operation of the Business through the effective date of termination or expiration;
- (ii) return to Fly To Fit Franchise all copies of the Manual, Confidential Information and any and all other materials provided by Fly To Fit Franchise to Franchisee or created by a third party for Franchisee relating to the operation of the Business, and all items containing any Marks, copyrights, and other proprietary items; and delete all Confidential Information and proprietary materials from electronic devices;
- (iii) notify the telephone, internet, email, electronic network, directory, and listing entities of the termination or expiration of Franchisee's right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and authorize their transfer to Fly To Fit Franchise or any new franchisee as may be directed by Fly To Fit Franchise, and Franchisee hereby irrevocably
- appoints Fly To Fit Franchise, with full power of substitution, as its true and lawful attorney-in-fact, which appointment is coupled with an interest; to execute such directions and authorizations as may be necessary or appropriate to accomplish the foregoing; and
- (iv) cease doing business under any of the Marks.
- 14.4 Remove Identification. Within 30 days after termination or expiration, Franchisee shall at its own expense "de-identify" the Location so that it no longer contains the Marks, signage, or any trade dress of a Fly To Fit business, to the reasonable satisfaction of Fly To Fit Franchise. Franchisee shall comply with any reasonable instructions and procedures of Fly To Fit Franchise for de-identification. If Franchisee fails to do so within 30 days after this Agreement expires or is terminated, Fly To Fit Franchise may enter the Location to remove the Marks and de-identify the Location. In this event, Fly To Fit Franchise will not be charged with trespass nor be accountable or required to pay for any assets removed or altered, or for any damage caused by Fly To Fit Franchise.
- 14.5 Liquidated Damages. If Fly To Fit Franchise terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Fly To Fit Franchise a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Fly To Fit Franchise under this Agreement for the 12-month period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 24 or (2) the number of months remaining in the then-current term of this Agreement. If Franchisee had not operated the Business for at least 12 months, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Fly To Fit Franchise during the period that Franchisee operated the Business. The "average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Fly To Fit Franchise" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees and Marketing Fund Contributions set forth in an addendum to this Agreement, unless this Section 14.5 is specifically amended in such addendum. Franchisee acknowledges that a precise calculation of the full extent of Fly To Fit Franchise's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable. Franchisee's payment to Fly To Fit Franchise under this Section will be in lieu of any direct monetary damages that Fly To Fit Franchise may incur as a result of Fly To Fit Franchise's loss of Royalty Fees and Marketing Fund Contributions that would have been owed to Fly To Fit Franchise after the date of termination; however, such payment shall be in addition to all damages and other amounts arising under Section 14.3 and Section 14.4, Fly To Fit Franchise's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Fly To Fit Franchise is entitled under this Agreement. Except as provided in this Section, Franchisee's payment of this lump sum shall be in addition to any other right or remedy that Fly To Fit Franchise may have under this Agreement or otherwise.
Source: Item 22 — CONTRACTS (FDD page 44)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, several obligations remain in effect for the franchisee even after the franchise agreement terminates or expires. These include obligations related to non-competition, confidentiality, indemnity, and dispute resolution, suggesting Fly To Fit aims to protect its brand and proprietary information even after a franchise relationship ends.
Specifically, the franchisee must pay all outstanding amounts owed to Fly To Fit, return all copies of the Manual, Confidential Information, and other materials, and cease using Fly To Fit's Marks. The franchisee must also notify relevant entities (telephone, internet, etc.) of the termination and authorize the transfer of associated numbers, addresses, and domain names to Fly To Fit. Within 30 days of termination or expiration, the franchisee is responsible for de-identifying the location by removing all Fly To Fit Marks and trade dress.
Furthermore, if Fly To Fit terminates the agreement due to the franchisee's default, the franchisee must pay liquidated damages. These damages are calculated based on the average Royalty Fees and Marketing Fund Contributions owed during the 12 months preceding the cessation of operations, multiplied by the lesser of 24 or the number of months remaining in the agreement term. Additionally, the Guarantor has restrictions post term. For two years after the Franchise Agreement expires or is terminated for any reason, the Guarantor shall not directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor located within five miles of Franchisee's Territory or the territory of any other Fly To Fit business operating on the date of termination or transfer, as applicable.
These post-termination obligations are fairly standard in franchising to protect the brand and prevent unfair competition. Prospective Fly To Fit franchisees should carefully consider these obligations, as they could have significant financial and operational implications after the franchise term concludes.