Following termination or expiration of an Exit Realty Upper Midwest franchise, for how long is the non-competition covenant in effect?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| l. | EXIT Realty Upper Midwest's approval of transfer by Franchisee | 18 | EXIT Realty Upper Midwest has the right to approve all transfers but will not unreasonably withhold approval. |
|---|---|---|---|
| m. | Conditions for EXIT Realty Upper Midwest approval of transfer | 18 | New Franchisee qualifies, transfer fee (10% of the then current initial franchise fee, not to exceed 25% of the Initial Franchise fee paid) paid, purchase agreement approved, training arranged, Assignment signed and current Franchise Agreement signed by new Franchisor or Franchisee (also see the non-competition section below). |
| n. | EXIT Realty Upper Midwest's right of first refusal to acquire your business | Not Applicable | |
| o. | EXIT Realty Upper Midwest's option to purchase your business | Not Applicable | |
| p. | Your death or disability | 16 | Treated as a non-curable breach. See Section 18.4 for transferability provisions. |
| q. | Non-competition covenants during the term of the Franchise | 21 | Subject to state law, no involvement in competing business without Subfranchisor's prior written consent. |
| r. | Non-competition covenants after the Franchise is terminated or expires. | 21 | Subject to state law, no competing business similar to EXIT for 1 year within the area licensed by us from EXIT. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 27–31)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the franchise is terminated or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from engaging in a competing business similar to Exit for a period of one year. This restriction applies within the specific geographic area that was licensed to the franchisee by Exit. The FDD also notes that these non-competition covenants are subject to state law, meaning the enforceability and specific terms can vary depending on the state where the franchise operates.
Non-competition agreements are a standard practice in franchising to protect the franchisor's brand and market share. The one-year restriction is fairly typical, as longer periods can be difficult to enforce and may unduly restrict a former franchisee's ability to earn a living. The geographic scope is also important, as it must be reasonable to protect the franchisor's legitimate business interests without being overly broad.
Prospective Exit franchisees should carefully review the non-competition clause in the Franchise Agreement and understand how it applies in their specific state. They should also consider the potential impact of this restriction on their future business opportunities if they decide to leave the Exit system. It would be prudent to consult with an attorney to assess the enforceability of the non-competition agreement in their jurisdiction and to understand their rights and obligations upon termination or expiration of the franchise agreement.