What happens if an Exit franchisee or guarantor dies or becomes permanently disabled?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
ll pay the transfer fee required under Section 18.5;
- (H) The proposed transferee shall sign Subfranchisor's then current form of Guaranty of this Agreement; and
- (I) The proposed transferee shall complete, or agree to complete, the training required under Section 9.11.
18.4. Death or Permanent Disability
Upon the death or permanent disability of Franchisee, if an individual, or of a guarantor of this Agreement, this Agreement, or guarantor's interest in the entity that owns or controls this Agreement, may be transferred or bequeathed by Franchisee or guarantor or his or her estate to any designated person or beneficiary approved by Subfranchisor. However, the transfer to the designee or beneficiary will be subject to the applicable provisions of Section 18.3 of this Agreement. The disposition shall be completed within a reasonable time, not to exceed nine (9) months from the date of the death or permanent disability. Failure to so transfer the interest within the nine (9) month period shall constitute a breach of this Agreement.
18.5. Transfer Fee
Franchisee must pay Subfranchisor a transfer fee, which will vary depending on whether the Transfer is a Major Transfer or a Minor Transfer. If the Transfer is a Major Transfer, the transfer fee is an amount equal to 10% of the then current Initial Fee (not to exceed 25% of the Initial Franchise fee paid) on the date of the Transfer. If the Transfer is a Minor Transfer, the transfer fee is an amount equal to $500.00. The transfer fee is nonrefundable even if, for any reason, the proposed Transfer does not occur. For purposes of this section, the following definitions apply:
(A) Major Transfer. The Transfer of a 50% or more interest in this Agreement or 50% or more interest in the equity or voting rights in the entity that owns or controls this Agreement, whether in one or more transfers.
(B) Minor Transfer.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee or a guarantor of the franchise agreement dies or becomes permanently disabled, the agreement or the guarantor's interest in the entity that owns or controls the agreement may be transferred or bequeathed to a designated person or beneficiary approved by the subfranchisor. This allows for the continuation of the Exit franchise under new management, providing a potential avenue for the franchisee's family or designee to continue the business.
The transfer to the designee or beneficiary is subject to the provisions outlined in Section 18.3 of the agreement. The disposition must be completed within a reasonable timeframe, specifically within nine months from the date of death or permanent disability. Failure to transfer the interest within this nine-month period constitutes a breach of the franchise agreement. This timeline ensures that the franchise is not left in limbo and that a decision is made promptly regarding its future.
In the event of a transfer, Exit requires the franchisee to pay a transfer fee to the subfranchisor. The amount of this fee depends on whether the transfer is classified as a Major Transfer or a Minor Transfer. A Major Transfer, involving 50% or more interest in the agreement or the entity, incurs a fee equal to 10% of the then-current Initial Fee, but not exceeding 25% of the initial franchise fee paid. A Minor Transfer, involving less than 50% interest, has a fixed fee of $500. However, no transfer fee is payable if an individual franchisee assigns its interest to a legal entity according to Section 14.2 of the agreement. This fee structure is typical in franchising to compensate the franchisor for the administrative costs and potential impact on the franchise system.