For an Exit franchise, what must equity holders of the assignee entity who have not signed the franchise agreement execute?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
with Section 18 of this Agreement. If this Agreement is owned equally by spouses or partners, the spouses or partners shall provide Subfranchisor a written statement at the time this Agreement is signed, signed by both parties stating the name of the final decision maker.
14.2. Conditions of Entity Ownership
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 compan
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee wishes to operate as a corporation, partnership, or limited liability company, and Exit consents to the assignment of the franchise agreement to that entity, there are specific requirements. One key condition is that all equity holders of the assignee entity who have not signed the original franchise agreement must execute a Personal Guaranty. This guaranty is in the form attached as Schedule 4 in the FDD.
This requirement means that any individual with an ownership stake in the corporation, partnership, or LLC who did not initially sign the franchise agreement must personally guarantee the entity's obligations under the agreement. This is a common practice in franchising to ensure that the franchisor has recourse to individual assets if the business entity fails to meet its financial or operational obligations. The personal guaranty provides an additional layer of security for Exit.
For a prospective Exit franchisee, this condition highlights the importance of understanding the full scope of personal liability involved when operating the franchise through a business entity. It also emphasizes the need to carefully review Schedule 4, which contains the specific terms of the Personal Guaranty. Franchisees should seek legal counsel to fully understand the implications of signing a personal guarantee and how it might affect their personal assets and financial situation. This requirement ensures that individuals with a financial interest in the franchise are equally committed to its success and compliance with the franchise agreement.