What form of Franchise Agreement must the transferee sign when acquiring a Stretch Zone franchise?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
) any other matter upon which certification is requested by us or a prospective assignee or lender. We and any prospective purchaser or lender of ours may rely upon any estoppel certificate you give under this Subsection. Any failure or refusal to timely sign a truthful estoppel certificate under this Subsection is an Event of Default on your part.
Section 10.2 TRANSFER BY YOU
(a) Personal Rights. You agree not to transfer any interest in this Agreement, or a major portion of the Business Assets comprising the Franchise Business, or more than 50% of the equity interests of the Franchisee if a Business Entity without our prior written consent. We will not unreasonably withhold, delay or condition our consent to any proposed transfer or assignment by you that requires our consent. Our consent is not required for a transfer of an equity interest, if the
Franchisee is a Business Entity, to another original equity owners but such transfer does not release the transferring Franchise Owner from her/his obligations under any Guaranty that s/he previously signed.
- (b) Transfer to Your Business Entity. You may assign this Agreement to a Business Entity in which you own a majority of the issued and outstanding equity interests if:
- (i) You or a Regional Manager actively manages the Business Entity and continues to devote his or her best efforts and full and exclusive time to the day-to-day operation of your Franchise Business. You must advise us of the name of the Regional Manager, and the Regional Manager must meet our standards, including training.
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)
Based on the 2025 Stretch Zone Franchise Disclosure Document, if a franchisee transfers their franchise to a business entity they own, the authorized officer (manager) of the business entity must sign a document, in a form approved by Stretch Zone, agreeing to be bound by all the provisions of the existing Franchise Agreement. This ensures that the business entity adheres to the original terms and conditions of the franchise agreement.
This requirement protects Stretch Zone by ensuring that any transfer of the franchise to a business entity does not dilute the obligations and standards set forth in the original agreement. The business entity must formally agree to uphold all responsibilities, maintaining consistency and quality across all franchise locations. The document signed by the business entity's officer acts as an assumption agreement, legally binding the new entity to the existing franchise terms.
Furthermore, the certificates representing equity interests in the business entity must bear a legend indicating that these interests are subject to the terms of the Franchise Agreement, including transfer restrictions. This disclosure ensures that all stakeholders are aware of the franchise agreement's influence on the equity interests. The legend also states that a copy of the Franchise Agreement is on file at the principal office of the company, providing transparency and access to the agreement's full terms.
In summary, Stretch Zone requires a formal assumption agreement and equity interest disclosures to maintain control and consistency when a franchise is transferred to a franchisee-owned business entity. This process ensures that the new entity is fully aware of and legally bound by the existing Franchise Agreement, safeguarding the franchisor's interests and the integrity of the Stretch Zone brand.