What happens to the Subfranchisor's interest in the Exit agreement upon transfer?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement may be unilaterally transferred by Subfranchisor without the approval or consent of Franchisee with the consent of Franchisor. Any such transfer shall inure to the benefit of the transferee and Subfranchisor's interest in this Agreement shall automatically terminate on the date of the transfer.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the subfranchisor has the ability to unilaterally transfer the agreement with the consent of the franchisor. Upon such a transfer, the subfranchisor's interest in the Exit agreement automatically terminates on the date of the transfer. This means the subfranchisor gives up all rights and responsibilities under the agreement to the new transferee.
For a prospective Exit franchisee, this clause ensures that the franchise agreement can continue even if the subfranchisor decides to transfer their interest. However, it also means the franchisee will be dealing with a new subfranchisor, which could lead to changes in the support, guidance, and relationship they have grown accustomed to. It is important for franchisees to understand that the subfranchisor can transfer the agreement without their consent, as long as the franchisor approves.
This transfer provision protects the Exit franchise system by allowing for a smooth transition of subfranchisor responsibilities. The new subfranchisor is bound by the existing franchise agreement, ensuring continuity for the franchisee. However, franchisees should be aware of the potential impact of a subfranchisor transfer on their business operations and relationship with the leadership.