Does Punch King Fitness have a right of first refusal to acquire a franchisee's business?
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, Punch King Fitness does have a right of first refusal to acquire a franchisee's business. Specifically, Section XVI(D) of the Franchise Agreement grants Punch King Fitness the right to purchase the franchisee's rights or interests in the Franchised Business.
This right is exercisable through written notice to the franchisee. The purchase price and terms will match any offer the franchisee has received from a third party, although Punch King Fitness can substitute equivalent cash for any non-cash payment forms proposed in the offer.
Any purchase by Punch King Fitness must be completed within ninety (90) days after the franchisee receives Punch King Fitness's written notice of intent to purchase. If Punch King Fitness chooses not to exercise its right of first refusal, the franchisee is then permitted to complete the sale to the original bona fide purchaser, subject to Punch King Fitness's approval. However, if the sale to that purchaser is not completed within one hundred twenty (120) days after the offer was initially delivered to Punch King Fitness, Punch King Fitness will regain its right of first refusal.