CHALLENGE
Our clients wanted to acquire the right to develop several fitness franchises that offered personal training and fitness services to customers from retail outlets. The clients hired us to review with them the franchise disclosure document (FDD), the franchise agreement and development agreement. After pointing out several significant provisions of the documents, it became clear that the clients had specific concerns which would need to be addressed. For example, they had not realized that though they were receiving a “protected territory” from the franchisor, that territory was not truly exclusive. The franchisor had the right to establish a branded gym at the local university. This is referred to as a non-traditional location and often, franchisors reserve the right to sell products or services from non-traditional locations even if those locations are within the boundaries of the franchisee’s territory. In addition, the agreement permitted the franchisor to require the clients to make substantial ongoing investments in their franchise business (e.g., the franchisor could require them to implement new computer systems, make renovations, and other costly modifications) and the clients needed to factor these costs into their business plan.
SOLUTION
Through our review of the documents and discussions with the clients, we ensured that they understood the terms of the agreements and the potential impact of those provisions on their business operations. We also helped them to consider potential added expenses when assessing their investment in the franchise. We then engaged in negotiations with the franchisor to obtain the best terms possible for our clients.
RESULT
Because of our unique and skillful experience representing single-unit, multi-unit and multi-state franchisees in the development and operation of their franchises, we provided essential guidance and negotiated several important provisions of the agreements with the franchisor.
