Under what conditions can Fly To Fit unilaterally terminate a franchise agreement?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
- 4. Default and Termination. Fly To Fit Franchise may terminate this MUDA by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee fails to satisfy the development schedule; or
- (ii) Fly To Fit Franchise has the right to terminate any franchise agreement between Fly To Fit Franchise and Franchisee (or any affiliate thereof) due to Franchisee's default thereunder (whether or not Fly To Fit Franchise actually terminates such franchise agreement).
- 5. Limitation of Liability. Franchisee's commitment to develop Fly To Fit businesses is in the nature of an option only. If Fly To Fit Franchise terminates this MUDA for Franchisee's default, Franchisee shall not be liable to Fly To Fit Franchise for lost future revenues or profits from the unopened Fly To Fit businesses. Franchisee may terminate this MUDA at any time.
Source: Item 23 — RECEIPTS (FDD pages 44–134)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, Fly To Fit Franchise may terminate the Multi-Unit Development Agreement (MUDA) by providing notice to the franchisee without an opportunity to cure the default under two specific conditions. First, if the franchisee fails to meet the development schedule outlined in the agreement, Fly To Fit has grounds for termination. Second, if Fly To Fit has the right to terminate any existing franchise agreement with the franchisee (or their affiliate) due to a default, Fly To Fit can terminate the MUDA, regardless of whether they actually terminate the other franchise agreement.
This means that a franchisee's failure to adhere to the agreed-upon timeline for opening new Fly To Fit locations can result in the termination of the MUDA. Additionally, any default by the franchisee under any other franchise agreement with Fly To Fit can trigger the termination of the MUDA, even if Fly To Fit chooses not to terminate the other franchise agreement. This provision gives Fly To Fit significant power to terminate the MUDA based on a broad range of potential defaults.
It is important to note that the franchisee's commitment to develop Fly To Fit businesses is considered an option. If Fly To Fit terminates the MUDA due to the franchisee's default, the franchisee will not be liable for lost future revenues or profits from the unopened Fly To Fit businesses. The franchisee also has the right to terminate the MUDA at any time.
Prospective franchisees should carefully review the development schedule and default provisions in both the MUDA and the standard franchise agreement to fully understand the circumstances under which Fly To Fit can terminate the agreement. Franchisees should also be aware of any state-specific regulations, such as those in Washington, that may supersede the franchise agreement regarding termination and renewal.