What obligations does a Stretch Zone area developer have upon termination or nonrenewal of the Area Development Agreement?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Area Development Agreement | Summary |
|---|---|---|
| termination or expiration of the Area Development Agreement, all your Area Development Rights cease rights cease. We are then free to open Company Owned Businesses or franchise Stretch Zone Franchises to others within your former Development Area but outside any Limited Protected Territories granted to you under Franchise Agreements for Franchise Businesses you are currently operating or are under construction, provided you are not in otherwise in default under any Franchise Agreement. | ||
| i. Your obligations on termination/ nonrenewal | Sections 4.1 and 7.4 | Upon termination or expiration of the Area Development Agreement, all your Area Development Rights cease rights cease. If we terminate the Area Development Agreement for your failure to meet the Development Schedule, you will retain all rights under the Franchise Agreements for the Franchise Businesses you have under lease, construction or in operation at that time, as long as you are not otherwise in default under those Franchise Agreements. You must comply with your post-termination and post-expiration obligations under the Franchise Agreements and those obligations that survive the termination or expiration of the Franchise Agreements including the obligations of indemnification, confidentiality and non-competition. |
| u. Dispute resolution by arbitration or mediation1 | Section 9.1 | All disputes must be resolved first by informal dispute resolution and, if unsuccessful, by mediation and, if mediation is not successful, then by arbitration except claims involving: 1. The Intellectual Property; 2. Any lease or sublease of real property; 3. Your obligations upon termination or expiration of your Area Development Agreement; 4. Any transfers; 5. Matters involving claims of danger, health or safety; and 6. Requests for restraining orders, injunctions or similar procedures. You must waive your rights to a jury trial and claims for punitive damages. |
Source: Item 17 — ITEM -17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 65–73)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, upon termination or expiration of the Area Development Agreement, all Area Development Rights cease. However, if the Area Development Agreement is terminated due to failure to meet the Development Schedule, the area developer retains all rights under Franchise Agreements for Franchise Businesses under lease, construction, or in operation, provided they are not in default under those Franchise Agreements.
The area developer must comply with post-termination and post-expiration obligations under the Franchise Agreements. These obligations survive the termination or expiration of the Franchise Agreements and include indemnification, confidentiality, and non-competition.
It is important to note that disputes regarding these obligations upon termination or expiration are excluded from mandatory mediation or arbitration, meaning Stretch Zone could pursue other legal avenues. This is a deviation from typical franchise practices where mediation or arbitration is often required for dispute resolution.