Does the Punch King Fitness Franchise Agreement outline the conditions under which the franchise can be transferred?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| of any interest therein or in Franchise or Franchisee assets. | |||
| l. | Our approval of transfer by franchisee | Section XVI(B) | We have the right to approve all transfers but may not unreasonably withhold consent. |
| m. | Conditions for Punch King Fitness, Inc. approval of transfer | Section XVI(B) | All outstanding obligations related to the Franchised Business must be paid, and the transferor's right to receive compensation must be subordinated and secondary to our rights. The transferee must sign a written assumption; the transferee must meet Punch King Fitness standards; the transferee must sign a then current Punch King Fitness franchise agreement and other ancillary agreements; the transferee must successfully complete Punch King Fitness initial training, and you or the transferee must pay a transfer fee. |
| n. | Our right of first refusal to acquire your business | Section XVI(D) | We have the right, exercisable by written notice to you, to purchase such rights or interests for the price and on the terms and conditions of any offer for your Franchised Business, except we may substitute equivalent cash for any form of payment proposed in such offer. Any purchase by us must be completed within ninety (90) days after your receipt of our written notice. If we do not exercise our right of first refusal, you may complete the sale of interest to the bona fide purchaser, subject to our approval; however, if the sale to the purchaser is not completed within one hundred twenty (120) days after the delivery of the offer to us, we will again have the right of first refusal. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–53)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, the Franchise Agreement does address the conditions for transferring a franchise. Specifically, Section XVI(B) of the agreement stipulates that Punch King Fitness's approval is required for all transfers, but the franchisor may not unreasonably withhold consent. This indicates that while franchisees have the right to transfer their business, Punch King Fitness retains some control over who becomes a franchisee.
Several conditions must be met for Punch King Fitness to approve a transfer. All outstanding obligations related to the franchised business must be paid. Additionally, the transferor's right to receive compensation must be subordinated and secondary to Punch King Fitness's rights. The transferee is required to sign a written assumption, meet Punch King Fitness's standards, sign the then-current franchise agreement and other ancillary agreements, and successfully complete Punch King Fitness's initial training program. Furthermore, either the franchisee or the transferee must pay a transfer fee.
Punch King Fitness also retains the right of first refusal to acquire the franchise business. According to Section XVI(D), Punch King Fitness can purchase the rights or interests of the franchise for the price and terms offered by any potential buyer, substituting equivalent cash for any proposed form of payment. Punch King Fitness must exercise this right within 90 days of receiving written notice of the offer, and any purchase must be completed within 90 days of that notice. If Punch King Fitness does not exercise its right of first refusal, the franchisee can proceed with the sale to the bona fide purchaser, subject to Punch King Fitness's final approval, provided the sale is completed within 120 days after the initial offer; otherwise, Punch King Fitness's right of first refusal is reinstated.