What constitutes an 'Affiliate' of Exit, according to the Franchise Agreement?

According to Exit's 2025 Franchise Disclosure Document, an 'Affiliate' is defined as any person or entity that directly or indirectly owns or controls the referenced party, is directly or indirectly owned or controlled by the referenced party, or is under common control with the referenced party. This definition is important for franchisees to understand, as it clarifies the scope of relationships that could have implications under the franchise agreement.

The definition of 'control' is further clarified to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity. This control can be exerted through ownership of voting securities, by contract, or otherwise. This broad definition of control means that even without direct ownership, an entity can be considered an affiliate if it has the power to influence the management and policies of another entity.

For a prospective Exit franchisee, this definition has several practical implications. It could affect issues such as territorial rights, non-compete agreements, and the transfer of the franchise. For example, if a franchisee's affiliate engages in activities that violate the franchise agreement, Exit could hold the franchisee responsible. Similarly, the definition of 'affiliate' could impact the franchisee's ability to sell or transfer the franchise, as any potential buyer who is an affiliate of a competitor might be subject to additional scrutiny or restrictions.