Are any encumbrances or transfers restricted under the Stretch Zone Franchise Agreement concerning interests in the Franchisee, the Franchise Business and the Agreement subject to the obligations set forth in Sections 17.1 to 17.3?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
greement and appoint a Designated Representative.
- (iv) An authorized officer (manager) of the Business Entity signs a document in a form we approve, agreeing to become a party bound by all the provisions of this Agreement;
- (v) All certificates representing equity interests must bear the following legend:
The Percentage of Membership Interests represented by this Certificate is subject to the terms of the Franchise Agreement between the Company and Stretch Zone Franchising LLC dated ______________ including its restrictions on transfer. A copy of the Franchise Agreement is on file at the principal office of the Company.
You will not be required to pay us a Transfer Fee in connection with a transfer in accordance with this Section 10.2(b). You understand that, if you transfer this Agreement to a Business Entity, you remain personally liable for all the monetary and non-monetary obligations under this Agreement arising before or after the transfer through the end of the Initial Term and any Renewal Term.
- (c) No Subfranchising Rights. You have no right to grant a subfranchise.
- (d) No Encumbrance of Franchise Right and Controlling Interest. While you may encumber the assets comprising your Franchise Business with our prior written consent and subject to Section 3.6, you may not grant a security interest, collaterally assign or otherwise encumber your interest in this Agreement. You may not pledge or otherwise encumber a controlling voting or equity interest in a Business Entity if you assign this Agreement to a Business Entity.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone FDD, the franchise agreement places restrictions on a franchisee's ability to encumber or transfer their interests. Specifically, while a franchisee can encumber the assets of their Stretch Zone business with the franchisor's prior written consent (subject to Section 3.6 of the agreement), they cannot grant a security interest, collaterally assign, or otherwise encumber their interest in the Franchise Agreement itself. Furthermore, a franchisee cannot pledge or encumber a controlling voting or equity interest in a Business Entity if the agreement is assigned to that entity. Any attempt to do so is considered void and constitutes an event of default.
However, Stretch Zone will generally consent to a transfer of the Franchise Agreement or the sale of the assets of the franchise business if the franchisee meets certain requirements. These include providing written notice of the intention to transfer or sell, along with any other required information or documents, such as a copy of the proposed purchase or transfer agreement. The franchisee must also disclose if they or a Franchise Owner propose to receive a purchase money security interest from the transferee, which requires Stretch Zone's prior written consent under conditions acceptable to them.
Additionally, Stretch Zone retains the right of first refusal, meaning they have the option to purchase the franchise business themselves before a transfer to a third party can occur. The franchisee must not be in default of any term of the Franchise Agreement or any other agreement with Stretch Zone or its affiliates at the time of the transfer. Any agreement used for a transfer or sale is subject to Stretch Zone's prior written approval, which, according to the FDD, will not be unreasonably withheld. These restrictions are typical in franchising, as franchisors want to maintain control over who operates their branded businesses and ensure compliance with brand standards and contractual obligations.
In addition, the Stretch Zone franchisee cannot use any of the Intellectual Property as security for any obligation or indebtedness. The franchisee must comply in filing and maintaining any required fictitious, trade or assumed name registrations for the "Stretch Zone" trade name for example, John Jones d/b/a "Stretch Zone" or ABC, Inc. d/b/a "Stretch Zone," and will sign all documents that Stretch Zone or their counsel deem reasonably necessary to obtain protection for the trademarks and their interest in the trademarks.