According to the Exit franchise agreement, what must a franchisee do to operate their business?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
y promise or representation.
13.2. Subfranchisor
It is understood that Subfranchisor has been granted a license by EXIT to grant franchises and enforce EXIT's rights in the Proprietary Marks in a specified territory which includes the Protected Territory.
14. FORM OF OWNERSHIP
14.1. In General
Individuals desiring to do business as a corporation, partnership, or limited liability company shall submit to Subfranchisor in writing a statement including appropriate evidence of compliance with all of the requirements of this Section 14 as may be reasonably requested by Subfranchisor. Subfranchisor's written consent to operate as a business entity shall be promptly given in the event of compliance with the requirements below. Nothing in this Agreement shall be construed as permitting Franchisee to license the rights, duties and obligations contained in this Agreement to a corporation, partnership or limited liability company without assignment made in accordance with Section 18 of this Agreement. If this Agreement is owned equally by spouses or partners, the spouses or partners shall provide Subfranchisor a written statement at the time this Agreement is signed, signed by both parties stating the name of the final decision maker.
14.2. Conditions of Entity Ownership
This Agreement is personal to the individual(s) signing as Franchisee. If Franchisee desires to do business as a corporation, partnership or limited liability company, EXIT or Subfranchisor will give its written consent to the assignment of this Agreement to such entity only under the following terms and conditions:
(A) If Franchisee is a corporation, partnership, or limited liability company, it must possess a valid real estate broker's License in the state or states where the Protected Territory is located.
(B) All individuals executing this Agreement shall remain personally liable for the performance of all obligations under this Agreement, irrespective of the formation of the entity and all equity holders of the assignee entity who have not signed this Agreement shall execute the Personal Guaranty in the form attached as Schedule 4.
(C) The assignee entity must be legally authorized to do business in the state(s) where the Protected Territory is located and shall at all times maintain itself in good standing in the state(s).
(D) The assignee entity shall not be engaged in any business endeavor whatsoever other than that which is primarily concerned with ownership and operation of the EXIT real estate service business as described in this Agreement.
(E) One of the individuals executing this Agreement must own or control at least fifty-one percent (51%) of the voting equity and, in the aggregate, at least fifty-one percent (51%) of all equity of the assignee entity, and retain ownership or control during the term of this Agreement.
(F) The following restrictions shall be conspicuously endorsed as a legend on each equity certificate, shall be indicated in the Bylaws, partnership agreement operating agreement, or other applicable governing document and shall be a part of any and all other agreements necessary in order to make the restrictions effective:
"The interest represented by this certificate is held subject to the terms and conditions of the EXIT Franchise Agreement with EXIT [trade name], Subfranchisor. Any encumbrance, assignment or transfer of the interest is subject to all restrictions imposed by the Franchise Agreement."
- (G) The capitalization of the assignee shall be approved in writing by Subfranchisor. Subfranchisor shall be provided with copies of the assignee's charter documents, organizational documents, organizational meeting minutes, "buy-sell" agreements, and any other relevant documents as may be requested by Subfranchisor.
- (H) The assignee entity's legal name shall not contain any word, phrase or clause which is the same as, derivative of, or deceptively or confusingly similar to the trademarks, service marks, slogans, or trade names of EXIT Realty Corp., including but not limited to "EXIT Realty Corp." Furthermore, the assignee entity's legal name shall not contain any whimsical, suggestive, coined or arbitrarily spelled words or acronyms that might conceivably become known as service marks or trademarks or that might conceivably detract from or consequently denigrate the distinctiveness of the EXIT marks.
15. TERMINATION BY FRANCHISEE
Franchisee shall have the right to terminate this Agreement by not less than thirty (30) days written notice to Subfranchisor, if Subfranchisor is in default in the performance or observance of any agreement, covenant, provision or term contained in this Agreement and the default, which remains uncured for more than thirty (30) days after written notice of the default is given to Subfranchisor.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to the 2025 Exit Franchise Disclosure Document, a franchisee must adhere to several conditions to operate their business, especially if they choose to operate as a corporation, partnership, or limited liability company. In general, individuals desiring to do business as a corporation, partnership, or limited liability company must submit a written statement to the subfranchisor with evidence of compliance with all requirements. The subfranchisor's written consent will be promptly given upon compliance with these requirements.
If a franchisee desires to operate as a corporation, partnership, or LLC, they must obtain written consent from Exit or the subfranchisor. The entity must possess a valid real estate broker's license in the states where the protected territory is located. All individuals who initially signed the franchise agreement remain personally liable for all obligations, regardless of the entity's formation. Additionally, all equity holders who did not sign the original agreement must execute a personal guaranty. The entity must be legally authorized to conduct business in the relevant states and remain in good standing. The entity's business activities must be primarily concerned with the ownership and operation of the Exit real estate service business. One of the original individuals must own or control at least 51% of the voting equity and at least 51% of all equity of the entity, and maintain this ownership throughout the agreement term.
Moreover, specific restrictions must be conspicuously endorsed on each equity certificate and included in the governing documents of the entity. These restrictions ensure that any interest in the entity is subject to the terms and conditions of the Exit Franchise Agreement, and any transfer or encumbrance is subject to the agreement's restrictions. Franchisees must also use computer hardware and software as required by Exit, including proprietary software, and pay a license fee not to exceed $250 per month for the computer software. This fee is paid through automatic monthly withdrawal. If a franchisee owns more than one Exit Franchise Agreement operated by the same legal entity and using the same trade name, the monthly computer software license fee for subsequent agreements is reduced to 25% of the standard monthly fee.