Does the Exit Franchise Agreement allow a franchisee to transfer their interest in the franchise without the Subfranchisor's prior written consent?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
t may be unilaterally transferred by Subfranchisor without the approval or consent of Franchisee with the consent of Franchisor. Any such transfer shall inure to the benefit of the transferee and Subfranchisor's interest in this Agreement shall automatically terminate on the date of the transfer.
18.2. Personal Nature of Agreement
The rights and duties set forth in this Franchise Agreement are personal to Franchisee, if an individual, and to the guarantors of this Agreement, and Subfranchisor has granted this franchise in reliance of Franchisee's and guarantor's representations as to its business skill, financial capacity, and personal character. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this franchise, nor any individual, partnership, corporation, or other legal entity which directly or indirectly owns any interest in this franchise shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber any direct or indirect interest in the Franchisee or this Agreement, or all or a substantial portion of the assets of the franchise business ("Transfer") without prior written consent of Subfranchisor, as provided in Section 18.3 below. Any
unauthorized Transfer, whether voluntary, involuntary, by operation of law or otherwise, or any attempt to do so, shall be deemed void and be grounds for termination of this Agreement by Subfranchisor.
18.3. Consent to Transfer Conditions
Subfranchisor will not unreasonably withhold its consent, which consent must be in writing, to any proposed Transfer, provided Franchisee and/or the transferee comply with the following, non-exclusive, conditions:
- (A) Franchisee shall have fully complied with the provisions of this Agreement, curing all defaults and noncompliance under this Agreement and any other franchise agreements it may have with Subfranchisor and EXIT; and
- (B) Franchisee shall have paid fully all monies due EXIT, Subfranchisor, and Brokers' Council; and
- (C) Franchisee shall submit to Subfranchisor current, accurate financial statements and other documents sufficient to enable Subfranchisor to determine and approve (in its discretion) the character, integrity, creditworthiness, business experience, reasonable net worth, professional credentials and ethical background of the proposed transferee; and
- (D) Franchisee shall furnish Subfranchisor with copies of the transfer documents, in a form acceptable to Subfranchisor; and
- (E) Franchisee shall provide both the proposed transferee and Subfranchisor complete financial information on the subject franchise required by the transferee; and
- (F) Franchisee shall provide Subfranchisor, on the then current form prescribed by Subfranchisor or EXIT, a full general release and waiver in favor of Subfranchisor, EXIT and their affiliates;
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the Franchise Agreement stipulates that a franchisee cannot transfer their interest in the franchise without obtaining prior written consent from the Subfranchisor. The agreement emphasizes the personal nature of the franchise grant, relying on the franchisee's business skills, financial capacity, and personal character.
Specifically, neither the franchisee nor any successor can sell, assign, transfer, convey, give away, pledge, mortgage, or encumber any direct or indirect interest in the franchise or the Franchise Agreement without the Subfranchisor's prior written consent. Attempting to do so without consent is considered a default and can lead to termination of the agreement.
However, the Subfranchisor agrees not to unreasonably withhold consent for a transfer, provided that the franchisee meets certain conditions. These conditions include rectifying any defaults, fulfilling all financial obligations to Exit, the Subfranchisor, and the Brokers' Council, and providing comprehensive financial and personal information about the proposed transferee to allow the Subfranchisor to assess their suitability. The franchisee must also provide the transferee with complete financial information about the franchise, obtain a general release and waiver in favor of Exit and the Subfranchisor, pay any required transfer fees, and ensure the transferee signs a guaranty of the agreement and completes the necessary training.