If the Exit franchise agreement is governed by Indiana law, to what area is the geographical limitation in Section 21 restricted?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
If this Agreement is governed by the laws of the State of Indiana, then: (1) the geographical limitation contained in Section 21 will be limited to within the Protected Territory; (2) Section 21 which states Subfranchisor is entitled to injunctive relief may be inapplicable; rather, Subfranchisor is entitled to seek injunctive relief; (3) notwithstanding any provisions of this Agreement to the contrary, a court of competent jurisdiction will determine (a) whether damages alone can adequately compensate Subfranchisor if there is a violation by Franchisee, Franchisee's shareholders or the partners or members, as the case may be, and (b) whether Subfranchisor will be required to post a bond or other security, and the amount of such bond or other security, in any injunctive proceeding commenced by Subfranchisor against Franchisee, Franchisee's shareholders or the partners or members, as the case may be.
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 governed by Indiana law, the geographical limitation in Section 21 of the agreement will be restricted to the franchisee's Protected Territory. This means that any restrictions on competition or business activities outlined in Section 21 will only apply within the specific geographic area designated as the franchisee's Protected Territory.
For a prospective Exit franchisee in Indiana, this is an important consideration. The Protected Territory defines the area where the franchisee has certain exclusive or semi-exclusive rights to operate their Exit franchise. The non-compete and other restrictions in Section 21 will only apply within this territory. This provides clarity and limits the scope of the restrictions, ensuring they are only applicable within the area where the franchisee is expected to focus their business efforts.
It is important for the franchisee to carefully review Schedule 3 of the Franchise Agreement, which contains the Description of Protected Territory, to fully understand the boundaries and scope of their territory. This will help them understand the extent to which the geographical limitations in Section 21 will affect their business operations and competitive activities.