Is the Exit Franchise Agreement personal to the individuals signing as Franchisee?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement is personal to the individual(s) signing as Franchisee. If Franchisee desires to do business as a corporation, partnership or limited liability company, EXIT or Subfranchisor will give its written consent to the assignment of this Agreement to such entity only under the following terms and conditions:
(A) If Franchisee is a corporation, partnership, or limited liability company, it must possess a valid real estate broker's License in the state or states where the Protected Territory is located.
(B) All individuals executing this Agreement shall remain personally liable for the performance of all obligations under this Agreement, irrespective of the formation of the entity and all equity holders of the assignee entity who have not signed this Agreement shall execute the Personal Guaranty in the form attached as Schedule 4.
(C) The assignee entity must be legally authorized to do business in the state(s) where the Protected Territory is located and shall at all times maintain itself in good standing in the state(s).
(D) The assignee entity shall not be engaged in any business endeavor whatsoever other than that which is primarily concerned with ownership and operation of the EXIT real estate service business as described in this Agreement.
(E) One of the individuals executing this Agreement must own or control at least fifty-one percent (51%) of the voting equity and, in the aggregate, at least fifty-one percent (51%) of all equity of the assignee entity, and retain ownership or control during the term of this Agreement.
(F) The following restrictions shall be conspicuously endorsed as a legend on each equity certificate, shall be indicated in the Bylaws, partnership agreement operating agreement, or other applicable governing document and shall be a part of any and all other agreements necessary in order to make the restrictions effective:
"The interest represented by this certificate is held subject to the terms and conditions of the EXIT Franchise Agreement with EXIT [trade name], Subfranchisor. Any encumbrance, assignment or transfer of the interest is subject to all restrictions imposed by the Franchise Agreement."
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the Franchise Agreement is indeed personal to the individual(s) who sign it as the franchisee. This means that the agreement is specifically tied to those individuals' business skill, financial capacity, and personal character, as Exit relies on these attributes when granting the franchise.
The FDD outlines conditions under which Exit or its subfranchisor may consent to the assignment of the agreement to a corporation, partnership, or limited liability company. These conditions include the entity possessing a valid real estate broker's license, the individuals who originally signed the agreement remaining personally liable for all obligations, and all equity holders of the assignee entity who did not sign the original agreement executing a personal guaranty.
Furthermore, the assignee entity must be legally authorized to do business in the relevant state(s) and remain in good standing. Its business activities must be primarily concerned with the operation of the Exit real estate service business. At least one of the original individuals must maintain ownership or control of at least 51% of the voting equity and all equity of the assignee entity during the term of the agreement. These restrictions must also be conspicuously noted on each equity certificate and within the governing documents of the entity. These stipulations ensure that even if the franchise is operated through a business entity, the original franchisee(s) remain actively involved and responsible for the franchise's performance.