2025 Issue 3 | GearedUp
2025 FDD Continued from page 25
• PFCSC to Consult with the IFC on NAF-Related Matters( FA § 10.1( 2)): PFCSC also added new language stating,“ In addition: we will consult, in an advisory capacity, with the recognized franchisee association( or the appropriate subcommittee thereof) on issues related to the NAF and will develop and implement a framework for reporting and advisory consultation on the NAF budget, planning process and marketing strategy.” In other words, PFCSC agrees to consult with the IFC( in an advisory capacity) and will be developing and implementing a framework to ensure that is appropriately taking place.
• Franchisee Right to Terminate( FA § 15.1( 2)): The standard form of FA has, for quite some time, given franchisees the right to terminate an FA before its natural expiration, so long as the franchisee is in compliance with the FA, the club has been open for at least three years, and the club has remained in the lowest 5 % of similarly sized PF ® clubs for 12 consecutive months before termination. Previously, to exercise this right, the franchisee only needed to provide 90 days’ advance notice. In the 2025 FA, PFCSC now requires a franchisee to provide at least 12 months’ advance notice before termination.
• Notification of Adverse Action( FA §§ 15.2( 5)( h) and 18.6; see also ADA § 10.3): Section 18.6 of the FA has, for years, required the franchisee to provide PFCSC with notice of certain“ Adverse Actions.” In the 2025 FA, PFCSC increased the breadth of the things that qualify as“ Adverse Actions,” such that the franchisee’ s reporting requirements have now been substantially expanded. The expanded definition now covers actions, including notices of default from lenders and landlords, credit downgrades, and“ any other event, that, in each case if not addressed or if resolved unfavorably, would be reasonably expected to have a material adverse effect on the BUSINESS, your right to develop, operate or occupy the Location, your financial condition or your ability to comply with this agreement or any other agreement you have with us or our affiliates ….” The cure period for failing to comply with this expanded definition of“ Adverse Action” is“ seven( 7) days to take all reasonable steps to remedy the default. If you fail to timely notify us of an event related to the BUSINESS that is reasonably likely to negatively impact the reputation of the PLANET FITNESS brand or the goodwill associated with the Marks and such default is not reasonably capable of cure, it shall have no cure period.” This new language significantly increases the frequency and breadth of reporting obligations and introduces default risks where, in certain instances, no cure period may be available.
Key Changes in the 2025 ADA
• Exceptions to ADA Territorial Protection( ADA §§ 2.2.4- 2.2.5): PFCSC inserted a new provision in Section 2.2.4 that allows PFCSC to“ acquire the right to franchise one or more other brands which may have locations in the Development
Area,” and in such an instance,“ may permit or require franchisees or licensees of these acquired brands to convert those locations to the PLANET FITNESS System, brand or marks.” PFCSC also inserted a new provision in Section 2.2.5 related to“ Multi-Territory Acquisitions,” which is defined as an opportunity to acquire either other existing businesses or leasehold rights to develop PF clubs, which includes target locations in the development area as well as in the development areas of other franchisees not affiliated with you. In such an instance, the developer would receive a right to participate in the proposed transaction. If, however, the developer decided not to participate and developers where at least 66 % of the target businesses are located commit to participate, then those existing units could be converted to PF clubs( despite the otherwise applicable“ exclusivity” in the ADA). In exercising the rights under Sections 2.2.4 and 2.2.5, PF has, however, agreed that its rights will be subject to the then-current site review / impact policy and has agreed, in certain circumstances, to discuss a potential amendment to the existing developer’ s development schedule.
• ADA Late Fees( ADA § 6.2): PFCSC inserted a new provision requiring the developer to pay PFCSC a $ 50,000“ late development fee” for each club that is not opened by the date required under the development schedule. Importantly, the fee is owed even if the club is subsequently opened during the cure period. In the event the ADA is terminated, however, new language says that the late development fees are not owed for clubs that were required to be open after the date of termination, i. e., this is not a liquidated damages provision for unopened locations.
Conclusion
While there were not as many changes in this year’ s FDD, FA and ADA as we sometimes see, the changes PFCSC did make were significant and have the potential to materially impact franchisees and developers for years to come. As such, and as I always recommend, franchisees and developers should review the new FA and ADA in their entirety to ensure they understand what they are signing. But, as always, if you have any questions, please do not hesitate to reach out to your counsel or me to discuss. G
J. Mark Dady is an attorney and the managing partner of Dady & Gardner, P. A. His practice is focused on the representation of franchisees, dealers and distributors located throughout the United States, and he has been working with the PFIFC and other PF franchisees and developers since late 2014. For more information on Mark Dady and Dady & Gardner, P. A., please visit www. dadygardner. com; call him at 612-359-5488; or send him an email to mdady @ dadygardner. com.
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