What happens to the goodwill associated with Exit's Proprietary Marks upon termination of the franchise agreement?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (A) Franchisee acknowledges EXIT's claim to the exclusive right, title and interest to the Proprietary Marks and acknowledges that any and all goodwill associated with and identified with the Proprietary Marks, including any goodwill which may result from Franchisee's use of the Proprietary Marks, shall inure directly and exclusively to the benefit of EXIT. On the expiration or termination of this Agreement, no monetary value shall be assigned as attributable to or associated with Franchisee's activities as a Franchisee under the Proprietary Marks.
- (B) Franchisee agrees not to make any disparaging remarks, comments or communications, whether oral or written, regarding Subfranchisor or EXIT, or any of their respective officers or directors.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Exit retains all goodwill associated with its Proprietary Marks. The franchisee acknowledges Exit's exclusive right to the Proprietary Marks, and any goodwill resulting from the franchisee's use of these marks benefits Exit exclusively. Upon the franchise agreement's expiration or termination, the franchisee will not be assigned any monetary value attributable to or associated with their activities as an Exit franchisee under the Proprietary Marks. This means that any increase in brand recognition or customer loyalty the franchisee achieves through using Exit's brand benefits Exit, not the franchisee, and the franchisee cannot claim compensation for it when the agreement ends.
This clause is standard in franchising, as the brand and its associated goodwill are the core assets of the franchise system. Exit franchisees contribute to the brand's value through their operations, but the brand equity ultimately belongs to Exit. This arrangement ensures uniformity and protects the brand's integrity across all franchise locations.
The franchisee also agrees not to make any disparaging remarks about Exit or its officers or directors. This obligation extends beyond the termination of the agreement, ensuring that the franchisee does not damage Exit's reputation even after the business relationship ends. Exit can seek injunctive relief to prevent damage to or loss of goodwill associated with the Proprietary Marks. This means Exit can pursue legal action to stop a franchisee from actions that could harm the brand's reputation and goodwill.
In practical terms, this means that if a franchisee builds a successful Exit location, the value of that success, as it relates to the brand's reputation, accrues to Exit. The franchisee cannot later claim that they are entitled to compensation for the goodwill they helped create. This underscores the importance of understanding that franchisees are building a business under a brand they do not own, and the long-term value of the brand remains with the franchisor.