Does the Exit franchisee, or their shareholders/partners/members, agree that damages alone are adequate compensation for violations of the section on injunctive relief?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and Franchisee's shareholders, partners and members, as the case may be, also agree that damages alone cannot adequately compensate EXIT and Subfranchisor if there is a violation of this section by Franchisee or Franchisee's shareholders, partners or members, and that injunctive relief against Franchisee, Franchisee's shareholders, partners or members is essential for the protection of EXIT, Subfranchisor and other franchisees. Franchisee and Franchisee's shareholders, partners or members, agree therefore, that if EXIT or Subfranchisor alleges that Franchisee or Franchisee's shareholders, partners or members have breached or violated this section, then EXIT or Subfranchisor will have the right to obtain injunctive relief against Franchisee and/or Franchisee's shareholders, or the partners or members, in addition to all other remedies that may be available to EXIT and Subfranchisor without the need to present evidence of irreparable injury. EXIT or Subfranchisor will not be required to post a bond or other security in any action where EXIT or Subfranchisor is seeking to enjoin Franchisee and/or Franchisee's shareholders, partners or members, from violating this section. In cases where EXIT or Subfranchisor is granted ex parte injunctive relief against Franchisee and/or Franchisee's shareholders, partners or members, Franchisee will have the right to petition the court for a hearing on the merits at the earliest time convenient to the court.
21.5. Severability
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchisee, along with their shareholders, partners, and members, acknowledge that monetary damages alone may not sufficiently compensate Exit or its subfranchisor if they violate the injunctive relief section. This acknowledgment underscores the critical importance of protecting Exit's system, proprietary marks, and confidential information.
This agreement means that Exit and its subfranchisor can seek injunctive relief against a franchisee, their shareholders, partners, or members to prevent breaches of the franchise agreement, particularly concerning proprietary marks, the Exit system, non-compete covenants, and confidentiality. Injunctive relief is a court order that compels a party to do or refrain from specific acts. Exit or its subfranchisor can pursue this legal remedy without needing to demonstrate irreparable harm or post a bond, which are often prerequisites in such cases.
However, if the franchise agreement is governed by Indiana law, a court will determine whether damages alone can adequately compensate the subfranchisor for violations and whether the subfranchisor must post a bond in any injunctive proceeding. This condition introduces a degree of legal flexibility depending on the governing state law, potentially altering the standard application of injunctive relief.
This provision highlights the serious implications of violating the franchise agreement and the measures Exit can take to protect its brand and system. Prospective franchisees should understand that Exit views certain breaches as significantly damaging, justifying immediate legal intervention beyond monetary compensation.