What is the geographic scope of the restriction on operating a real estate franchise organization after the Exit franchise agreement terminates?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
t or induce any person who is, at the time of termination or expiration of this Agreement, retained as a sales representative (as the phrase "sales representative is defined in the EXIT Formula attached to this Agreement, which may from time to time be amended at the discretion of EXIT) of any EXIT franchisee to stop serving as an agent for that party; or
- (d) within the state(s) in which the Protected Territory is located, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in the business of selling, managing or servicing real estate franchise organizations, irrespective of whether services are provided directly to the franchising operations or the System's franchisee's; or
- (e) solicit or induce any person who is, at the time of termination or expiration of this Agreement an EXIT franchisee or an equity-holder in any entity which is, at the time of termination or expiration of this Agreement an EXIT franchisee, to terminate or not renew his relationship with EXIT or Subfranchisor; or
- (f) divert, or attempt to divert, any business or customer of an EXIT Franchisee, to any competitor;
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the franchise agreement is terminated, the franchisee is restricted from engaging in the business of selling, managing, or servicing real estate franchise organizations within the state(s) where their Protected Territory is located. This restriction applies regardless of whether the services are provided directly to the franchising operations or to the Exit System's franchisees.
In addition to the state-wide restriction on real estate franchise organizations, there are also restrictions within a ten-mile radius of the franchisee's former office. The franchisee cannot own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any real estate brokerage business that utilizes a reward system for sponsoring sales representatives or operates in a substantially similar manner to the Exit System. This clause aims to prevent franchisees from directly competing with Exit's specific business model and recruitment strategies in close proximity to their former location.
However, the ten-mile radius restriction does not apply if the Exit franchise agreement expires at the end of its term. This means that if the agreement simply runs its course and is not renewed, the franchisee is not bound by the ten-mile radius restriction on operating a general real estate brokerage business. The state-wide restriction on operating a real estate franchise organization, however, remains in effect even upon expiration of the agreement.
These post-termination restrictions are designed to protect Exit's business model, franchise network, and goodwill. Prospective franchisees should carefully consider these limitations and how they might impact their future business endeavors should they decide to leave the Exit system.