Under what circumstances is a Stretch Zone franchisee required to pay a transfer fee?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
- (vii) You will pay us the Transfer Fee to reimburse us for our costs in approving the transfer and in training the transferee.
You will not be required to pay us a Transfer Fee in connection with a transfer in accordance with this Section 10.2(b).
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 Stretch Zone's 2025 Franchise Disclosure Document, a franchisee will be required to pay a transfer fee under certain conditions when transferring their franchise. Specifically, the franchisee must pay a transfer fee to reimburse Stretch Zone for costs associated with approving the transfer and training the new transferee. This fee covers Stretch Zone's expenses in ensuring the new franchisee is adequately prepared to operate the business according to Stretch Zone standards.
However, a transfer fee is not required if the franchisee is assigning the agreement to a business entity in which they own a majority of the equity, provided certain conditions are met. These conditions include the franchisee or a Regional Manager actively managing the business, the business entity not using the "Stretch Zone" trade name, approval from the entity's governing bodies, and the entity agreeing to be bound by the franchise agreement. Even in this case, the original franchisee remains personally liable for all obligations under the agreement.
In addition to paying the transfer fee, the transferee must also meet several other requirements. The transferee must complete Stretch Zone's application procedures, interview at the principal office, demonstrate the necessary business and personal skills, sign the current form of the Franchise Agreement, assume the obligations under the premises lease, and ensure their personnel complete the required training programs. These conditions ensure that any new franchisee meets Stretch Zone's standards and is fully prepared to operate the franchise successfully.