Geared Up Issue 2 2015 | Page 33
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member from the non-compete), make sure those changes are
carried forward into your renewal franchise agreement.
Finally, if you want to make any changes to the structure of
the ownership group (e.g., changing percentages of ownership or
adding a son or daughter to the franchise agreement), doing so
during renewal is often a good idea, and can oftentimes save you
money related to paperwork and transfer fees.
In the end, renewing a franchise agreement is usually not as
exciting as signing a new one, but, if you follow the steps in your
agreement and work proactively with your franchisor to address
certain issues, it does not have to be an unnecessarily painful
process.
While this article provides some general guidance on the
renewal process, it is not a substitute for your obtaining advice,
legal and otherwise, related to your unique situation. Before
signing a renewal agreement, it is always a good idea to reach out
to your attorney, the association, and/or a trusted adviser to make
sure that you fully understand your rights and obligations. G
J. Mark Dady is a partner at Dady & Gardner, P.A. His
practice is focused on the representation of franchisees,
dealers and distributors located throughout the United
States. For more information, visit www.dadygardner.com,
call 612-359-5488 or email [email protected].
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GearedUp | 2015 Issue 2
franchisors can use the lack of written notice as an easy way not to
renew a franchisee.
If you have not done so already, it is a good idea to put
calendar reminders in place 12 months before the expiration of
your franchise agreements, and, when you receive the reminder,
send the written notice. Even if you are not certain you are going
to renew, sending the notice does not obligate you to renew, it just
starts the renewal process. Additionally, make sure that you are in
compliance with your franchise agreement at the time you send
the written notice, as franchisors can typically refuse to renew your
franchise agreement if you are not in compliance at the time of
your request.
Second, once you’ve provided the required written notice
and started the discussion related to renewal, the next big
issue a franchisee typically faces is how much remodeling
and/or upgrading the franchisor will require as a condition of
renewal. While some amount of remodeling is often unavoidable,
keep in mind that the 2015 Planet Fitness franchise agreement,
as well as the Memorandum of Understanding (MOU) retroactive amendments all of you should be receiving soon, expressly
requires Planet Fitness to be reasonable in connection with the
remodeling and upgrade requirements for renewing franchisees.
That does not mean that you will be able to totally avoid the
obligation to remodel/upgrade, but it does mean that, among
other things, Planet Fitness will be required to act reasonably
when setting the specifics related to your individual remodel/
upgrade and work with you to structure the remodel to avoid
unduly or unnecessarily impacting your business (e.g., work with
you to avoid remodeling during your busiest times of the year).
In addition, as a result of the MOU amendments, if you
completed a substantial remodel or a substantial replacement
of equipment in the two years before renewal, you are generally
not going to be required to remodel the same areas or replace
the same equipment in order to renew. In short, while you will
have to spend some time and money remodeling and replacing
equipment, which, I believe, most franchisees agree is good for the
brand, Planet Fitness is required to work with you to ensure that
the process is not unnecessarily or unreasonably painful.
Finally, after complying with the procedural renewal
requirements and working out the issues related to
remodeling/upgrading, the last key step in the renewal
process is the execution of a new franchise agreement. While the
association was able to obtain substantial changes on behalf of its
members in 2015, the franchise agreement you are signing is not
an agreement between the association and Planet Fitness — it is
an agreement between you and Planet Fitness.
Accordingly, it is important that you are comfortable with the
terms of the renewal franchise agreement, and that you understand your rights and obligations under the renewal franchise
agreement. In addition, if you have an area development agreement that impacts the terms of your franchise agreements (not
just initial franchise agreements, but renewal franchise agreements
as well), you should ensure that the renewal fra