What is the Exit franchisee's obligation regarding inspections conducted by Exit or the Subfranchisor?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
results from operations. Franchisee shall also file with EXIT and Subfranchisor any other reports as EXIT or Subfranchisor may, from time to time, request. All statements shall be certified by Franchisee (or the chief financial officer if Franchisee is not an individual).
11.2. Audit Rights
EXIT and Subfranchisor shall have the right to inspect and audit all of Franchisee's books, records, and procedures. Franchisee shall permit, and understands that it should expect, regular and frequent inspection at reasonable times, by agents or representatives of EXIT and/or Subfranchisor of all books, records, MLS agent rosters and MLS transaction reports, procedures, and services of Franchisee in order to determine compliance with this Agreement. All discrepancies shall be paid within ten (10) days after the date Franchisee receives notice of such discrepancy. If any underpayment exceeds five percent (5%) of the amount due, then Franchisee shall pay all costs and expenses relating to the audit, including, but not limited to, travel, lodging, meals, attorneys', accountants' and other professional fees. All payments due pursuant to this section shall be subject to the interest charges provided in Section 7.2 above.
On the 15th day following each calendar quarter Franchisee shall provide Subfranchisor with MLS reports from each MLS of which the Franchisee is a member, showing current agent roster and all transactions closed within the previous calendar quarter.
**11.3.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Exit franchisees must allow regular and frequent inspections by Exit or the Subfranchisor at reasonable times. These inspections are conducted by agents or representatives of Exit and/or the Subfranchisor to ensure the franchisee complies with the franchise agreement. The inspections cover all books, records, MLS agent rosters and transaction reports, procedures, and services of the franchisee.
Exit franchisees are required to cooperate with these inspections, provide any requested assistance, and promptly correct any deficiencies identified by Exit or the Subfranchisor, regardless of whether a formal notice of default or notice to cure is issued. This means franchisees must be proactive in addressing any issues found during inspections to maintain compliance with the Exit System standards.
If an audit reveals any underpayment exceeding five percent of the amount due, the Exit franchisee is responsible for covering all costs and expenses associated with the audit. These costs include travel, lodging, meals, and professional fees for attorneys, accountants, and other professionals. Additionally, all payments due as a result of the audit are subject to interest charges as outlined in the agreement. This financial responsibility underscores the importance of accurate record-keeping and compliance to avoid potentially significant audit-related expenses.