Under what condition are transfer fees collectable by Stretch Zone?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
You will not be required to pay us a Transfer Fee in connection with a transfer in accordance with this Section 10.2(b). You understand that, if you transfer this Agreement to a Business Entity, you remain personally liable for all the monetary and non-monetary obligations under this Agreement arising before or after the transfer through the end of the Initial Term and any Renewal Term.
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 transfer fee is not required when assigning the Franchise Agreement to a business entity under specific conditions. These conditions include the franchisee or a Regional Manager actively managing the business, devoting full time and effort to the franchise's daily operations, and meeting Stretch Zone's standards, including training. The business entity's name cannot include "Stretch Zone", and its governing bodies must approve the agreement's assumption and appoint a Designated Representative. Additionally, an authorized officer must sign a document agreeing to be bound by the agreement's provisions, and all equity interest certificates must include a legend about transfer restrictions. Even with this type of transfer, the franchisee remains personally liable for all monetary and non-monetary obligations under the agreement arising before or after the transfer, through the end of the initial and any renewal terms.
This policy benefits franchisees by allowing them to structure their business as a separate legal entity without incurring additional transfer fees, provided they continue to manage the business actively and meet Stretch Zone's operational standards. This can be particularly useful for tax planning, liability protection, or estate planning purposes. However, franchisees should note that this transfer does not release them from their personal obligations under the Franchise Agreement.
It is important for prospective Stretch Zone franchisees to carefully review Section 10.2(b) of the Franchise Agreement to fully understand the conditions under which a transfer fee is waived. Franchisees should also consult with legal and financial advisors to assess the implications of transferring the agreement to a business entity and to ensure compliance with all requirements.