Are the Exit company contributions to the SEP retirement plan mandatory or discretionary?

According to Exit's 2025 Franchise Disclosure Document, the company's contributions to the Simplified Employee Pension (SEP) retirement plan are discretionary. The document states that Exit "may make discretionary contributions directly into eligible employees' individual retirement accounts." This means that Exit is not obligated to contribute to the plan every year, and the amount they contribute can vary.

For a prospective franchisee, this implies that while there is a retirement plan in place, they cannot rely on consistent contributions from Exit. The contributions are subject to the company's discretion and financial performance. The FDD notes that the total company contributions for the years ended December 31, 2024, 2023, and 2022 were $5,050, $8,500, and $24,000, respectively, illustrating the variability in contribution amounts.

This type of discretionary contribution is not uncommon in smaller franchise systems, as it allows the franchisor flexibility in managing their finances. However, it's important for potential franchisees to consider this when evaluating the overall compensation and benefits package. They should inquire about the factors that influence Exit's decision to contribute to the SEP and whether there are any specific performance metrics that trigger contributions. Understanding the historical contribution patterns and the company's policy on retirement contributions can help franchisees make informed decisions about their own retirement planning.