Under what condition is a buy-back provision in the Stretch Zone franchise agreement lawful in Washington?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Certain Buy-Back Provisions. Provisions in franchise agreements or related agreements that permit the franchisor to repurchase the franchisee's business for any reason during the term of the franchise agreement without the franchisee's consent are unlawful pursuant to RCW 19.100.180(2)(j), unless the franchise is terminated for good cause.
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, in Washington State, a buy-back provision in the franchise agreement that allows Stretch Zone to repurchase a franchisee's business during the term of the agreement is generally unlawful. However, there is an exception to this rule.
Specifically, such a buy-back provision is permissible if the franchise is terminated for good cause. This means that Stretch Zone can only exercise its right to repurchase the franchise if there is a legitimate and justifiable reason for terminating the agreement, as defined by Washington law.
This protection is afforded to Stretch Zone franchisees in Washington under the Washington Franchise Investment Protection Act, which aims to balance the rights and obligations between franchisors and franchisees. Prospective franchisees in Washington should carefully review the franchise agreement and related documents with legal counsel to fully understand their rights and obligations under state law, particularly regarding termination and buy-back provisions.