Can other Stretch Zone franchisees enforce the covenants in Section 13.1 as third-party beneficiaries?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 13.2 INDEPENDENT COVENANTS; THIRD PARTY BENEFICIARIES
- (a) Independent Covenants. The parties agree that the covenants in this ARTICLE are independent of any other provision of this Agreement. You agree that the existence of any claim you may have against any affiliate or us under this Agreement or otherwise, is not a defense to our enforcement of these covenants.
- (b) Third Party Beneficiaries. The parties agree that all other Franchisees are third party beneficiaries of the terms of Section 13.1. Another Franchisee has the right to enforce these covenants at its expense without our joinder or participation, if we are unwilling or unable to enforce these covenants, but without any liability to the Franchisee on our part.
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 Franchise Disclosure Document, other franchisees are indeed considered third-party beneficiaries specifically regarding the terms outlined in Section 13.1 of the franchise agreement. This means that if Stretch Zone is either unwilling or unable to enforce these particular covenants, another franchisee has the legal right to step in and enforce them directly, at their own expense. However, Stretch Zone will not be liable to the franchisee for doing so.
This provision empowers Stretch Zone franchisees, giving them a mechanism to protect their interests and the integrity of the franchise system. For example, if Section 13.1 contains covenants related to territorial protection or non-competition, a franchisee could take action against another franchisee who is violating those terms, even if Stretch Zone chooses not to intervene. This can be particularly important in maintaining fair competition and preventing market saturation within the Stretch Zone network.
It is important to note that while franchisees can enforce these covenants, they must do so at their own expense. This includes legal fees and any other costs associated with pursuing the enforcement action. Additionally, this right of enforcement does not create any liability on the part of Stretch Zone to the franchisee taking action. Prospective franchisees should carefully review Section 13.1 to understand the specific covenants that are subject to this third-party beneficiary provision and assess the potential implications for their business.