What internal approvals are required within the Business Entity when a Stretch Zone franchisee transfers the agreement?
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.
- (ii) The Business Entity cannot use the trade name "Stretch Zone" in any derivative or form in the name of the Business Entity.
- (iii) The Board of Directors (Management Committee) and Shareholders (Members) of the Business Entity approve the assumption of this Agreement, authorize an officer or manager to sign a joinder agreement or assumption of this Agreement and appoint a Designated Representative.
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, if a franchisee wishes to transfer their Franchise Agreement to a Business Entity in which they own a majority stake, the Board of Directors (or Management Committee) and the Shareholders (or Members) of that Business Entity must approve the assumption of the Franchise Agreement. This approval must also authorize an officer or manager to sign a joinder agreement or assumption of the agreement, and they must appoint a Designated Representative.
This requirement ensures that the Business Entity is fully aware of and agrees to be bound by the terms of the Franchise Agreement. It also establishes clear lines of authority and responsibility within the Business Entity regarding the franchise operation. The need for both the Board/Committee and Shareholders/Members to approve highlights the importance Stretch Zone places on ensuring comprehensive internal agreement before a transfer is finalized.
Furthermore, an authorized officer or manager of the Business Entity must sign a document, approved by Stretch Zone, agreeing to be bound by all provisions of the Franchise Agreement. This step legally solidifies the Business Entity's commitment to adhering to the franchise terms. All certificates representing equity interests must also carry a specific legend indicating that these interests are subject to the terms and restrictions of the Franchise Agreement, making this clear to all stakeholders.
While the franchisee is not required to pay a Transfer Fee for transfers meeting these conditions, they remain personally liable for all monetary and non-monetary obligations under the Agreement, both before and after the transfer, throughout the initial and any renewal terms. This personal liability underscores that the transfer to a Business Entity does not absolve the original franchisee from their commitments to Stretch Zone.