After a permitted transfer of a Stretch Zone franchise, is the original franchisee relieved of all liability?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
No transfer we approve relieves you of liability for your conduct before the transfer, including conduct in breach of this Agreement. You are relieved of all liability for your transferee's conduct after a permitted transfer except you remain obligated to comply with those provisions that expressly survive an expiration or termination of this Agreement including the obligations of indemnification, confidentiality and noncompetition.
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, a franchisee is generally relieved of liability for their transferee's conduct after a permitted transfer, but with specific exceptions. The franchisee remains obligated to comply with provisions that expressly survive the expiration or termination of the Franchise Agreement. These surviving obligations include indemnification, confidentiality, and noncompetition agreements.
This means that even after a Stretch Zone franchise is sold to a new owner, the original franchisee could still be held responsible for certain liabilities. For example, if the original franchisee breached a confidentiality agreement before the transfer, they would remain liable even after the new owner takes over. Similarly, if the original franchisee is found to have violated non-competition terms before the transfer, they would still be responsible.
It is important for prospective Stretch Zone franchisees to understand these ongoing obligations when considering selling their franchise. They should carefully review the Franchise Agreement to identify all provisions that survive a transfer and seek legal counsel to fully understand their potential liabilities even after transferring the franchise. This ensures they are aware of their responsibilities and can take appropriate measures to mitigate any future risks.