What are the potential consequences if a Stretch Zone franchisee fails to comply with the Regional Advertising Cooperative Agreement?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) Delinquent Payments. All late payments accrue interest at the rate of 1.5% per month beginning the date payment was due until fully paid or at the highest rate permitted by applicable state law, whichever is less, calculated on a daily basis.
- (e) Failure to Make Payments. If the Member fails to make 2 or more consecutive monthly contributions to the DMA Cooperative, the Franchisor may elect to terminate this Agreement and the Franchise Agreement for the Franchise Business if payment is not made within 30 days of receipt of the Franchisor's written demand for payment. If the delinquent payments are not made within the 30-day cure period, the Franchisor may immediately terminate this Agreement and the Franchise Agreement for the Franchise Business upon notice to the Member without providing any additional time to cure.
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, a franchisee's failure to comply with the Regional Advertising Cooperative Agreement can lead to specific repercussions. The agreement requires franchisees to make monthly contributions to the DMA Cooperative, with the amount not exceeding 1% of their Gross Revenues. The initial contribution amount is determined at the organizational meeting. Payments are made through the ClubReady Electronic Payment system.
If a franchisee is late on payments, interest accrues at a rate of 1.5% per month, calculated daily, or the highest rate permitted by state law, whichever is less. More seriously, if a franchisee fails to make two or more consecutive monthly contributions, Stretch Zone has the option to terminate both the Regional Advertising Cooperative Agreement and the Franchise Agreement, provided that payment is not made within 30 days of receiving written demand for payment from Stretch Zone.
If the franchisee does not cure the delinquent payments within this 30-day period, Stretch Zone can immediately terminate both agreements upon notice, without offering any additional time to remedy the situation. This could result in the franchisee losing their Stretch Zone franchise.