Under what circumstances does Stretch Zone not have a right of first refusal?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 12.5 DISTINGUISHING OPERATIONS
- (a) Non-Competitive Business. If we do not exercise our option under Section 12.4 and you desire to remain in possession of the Premises, you may only operate a business that does not violate your covenant not to compete. You must make all modifications to the Premises immediately upon termination of this Agreement as necessary to distinguish the appearance of the Premises from that of other Franchise Businesses.
- (b) De-Identification. You must immediately remove all identifying architectural superstructure and signage on, about or in the Premises bearing the name or logos of Stretch Zone (or any name or logo similar to Stretch Zone), in the manner we specify. You will hold all property belonging to us for delivery to us, at our expense, upon request. Any signage that you are unable to remove within 1 Business Day of the termination or expiration of this Agreement you must completely cover the signage until the time of their removal. If you fail or refuse to comply with this obligation, we have the right to enter the Premises, without being guilty of trespass or any other tort for the purpose of removing the signage and storing them at another location, at your reasonable expense (for signage not owned by us) payable by you on demand.
- (c) Notice to Customers. Until you complete all modifications and alterations required by this Section, you must maintain a conspicuous sign at the Premises in a form we specify stating that your business is no longer associated with our Business System. You also must advise all customers or prospective customers calling your new telephone number that your new business is no longer associated with our Business System.
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)
Based on the 2025 Stretch Zone Franchise Disclosure Document, Section 12.4 outlines the conditions regarding the right of first refusal. If a franchisee terminates the Franchise Agreement, Stretch Zone has the option to purchase the franchise business. However, according to Section 12.5 (a), if Stretch Zone does not exercise its option to purchase the franchise, and the franchisee desires to remain in possession of the premises, the franchisee may only operate a business that does not violate the covenant not to compete.
In this case, the franchisee must make all necessary modifications to the premises immediately upon termination of the agreement to differentiate its appearance from other Stretch Zone franchise businesses. This includes removing all identifying architectural superstructures and signage bearing the Stretch Zone name or logos, as specified by Stretch Zone. The franchisee must also maintain a conspicuous sign stating that the business is no longer associated with the Stretch Zone Business System and advise customers of the same.
Therefore, Stretch Zone does not exercise its right of first refusal if the franchisee wishes to continue operating at the premises under a different, non-competing business, and complies with the required modifications and notifications to distinguish the business from the Stretch Zone brand. This allows the franchisee to continue using the location without Stretch Zone intervening to take over the business.