Who determines if a crime impairs the goodwill associated with the Proprietary Marks for an Exit franchise?

According to Exit's 2025 Franchise Disclosure Document, the Subfranchisor has the right to terminate the agreement with the franchisee if the franchisee or any of its equity holders, directors, or officers are convicted of a felony or other crime that, in the reasonable judgment of the Subfranchisor, impairs the goodwill associated with the Proprietary Marks. Therefore, the Subfranchisor is the entity that makes the determination of whether a crime impairs the goodwill of Exit's Proprietary Marks.

This determination is significant because it directly impacts the franchisee's ability to continue operating their Exit franchise. If the Subfranchisor reasonably judges that a crime committed by the franchisee or related parties impairs the goodwill, they can terminate the agreement, potentially leading to a loss of the franchisee's investment and business. This clause highlights the importance of maintaining a clean legal record and ensuring that all individuals associated with the franchise do the same.

In the franchise industry, it is common for franchisors to include clauses that allow for termination in cases where the franchisee's actions could harm the brand's reputation or goodwill. This is because the franchisor's brand name and reputation are critical assets, and they must be protected. The Exit franchise agreement reflects this standard practice by giving the Subfranchisor the authority to terminate the agreement if a crime impairs the goodwill associated with the Proprietary Marks.