What actions related to bankruptcy or insolvency would trigger a default under the Exit franchise agreement?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
y with the provisions of this Agreement three (3) or more times, whether or not corrected after notice.
- (iv) Franchisee or any of its equity holders, directors or officers are convicted of a felony or other crime that, in the reasonable judgment of Subfranchisor, impairs the goodwill associated with the Proprietary Marks.
- (v) The filing of a voluntary or involuntary petition under any bankruptcy or insolvency law or a petition for the appointment of a receiver, or an assignment for the benefit of creditors, if Franchisee or a guarantor of this Agreement i
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the filing of a voluntary or involuntary petition under any bankruptcy or insolvency law, or a petition for the appointment of a receiver, or an assignment for the benefit of creditors, will trigger a default under the Exit franchise agreement if the franchisee or a guarantor of the agreement is subject to the action.
This means that if the franchisee or anyone who has guaranteed the franchisee's obligations (like a loan) files for bankruptcy, becomes insolvent, seeks a receiver, or makes an assignment for the benefit of creditors, Exit has grounds to terminate the franchise agreement. This is a fairly standard clause in franchise agreements, as financial instability can significantly impact the franchisee's ability to operate the business and uphold the brand's reputation.
It is important to note that this event of default comes with no right to cure. This means that Exit can terminate the agreement immediately after providing notice to the franchisee, without giving the franchisee an opportunity to rectify the situation. This lack of a cure period underscores the seriousness with which Exit views financial instability on the part of the franchisee or their guarantor.