Does the Exit franchise agreement require the franchisee to obtain consent for activities that are not related to the Exit franchise?
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 Byl
Source: Item 16 — RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL (FDD page 27)
What This Means (2025 FDD)
According to the 2025 FDD, the Exit franchise agreement outlines specific conditions regarding the form of ownership a franchisee can adopt. If a franchisee wishes to operate as a corporation, partnership, or limited liability company, they must obtain written consent from Exit or the subfranchisor for the assignment of the agreement to such an entity.
Specifically, Exit mandates that if the franchisee chooses to operate as a corporation, partnership, or limited liability company, the entity cannot engage in any business endeavor other than owning and operating the Exit real estate service business. Additionally, at least one of the individuals who initially signed the franchise agreement must maintain ownership or control of at least 51% of the voting equity and overall equity of the assignee entity throughout the term of the agreement.
These conditions ensure that the Exit franchise maintains consistent standards and focus, preventing franchisees from diverting resources or attention to unrelated business activities. For a prospective franchisee, this means that if they plan to operate under a business entity, they must adhere strictly to the operation of the Exit franchise and cannot engage in other business ventures through that entity without potentially violating the franchise agreement.