If the Exit franchisee desires to operate as an entity, who remains personally liable for the obligations under the Franchise Agreement?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
with Section 18 of this Agreement. If this Agreement is owned equally by spouses or partners, the spouses or partners shall provide Subfranchisor a written statement at the time this Agreement is signed, signed by both parties stating the name of the final decision maker.
14.2. Conditions of Entity Ownership
This Agreement is personal to the individual(s) signing as Franchisee. If Franchisee desires to do business as a corporation, partnership or limited liability company, EXIT or Subfranchisor will give its written consent to the assignment of this Agreement to such entity only under the following terms and conditions:
- (A) If Franchisee is a corporation, partnership, or limited liability compan
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee wishes to operate as a corporation, partnership, or limited liability company, the individuals who initially signed the Franchise Agreement will remain personally liable for all obligations under the agreement. This condition applies regardless of the formation of the entity. Additionally, all equity holders of the assignee entity who did not sign the original agreement must execute a Personal Guaranty. This ensures that Exit maintains recourse to the original signers and any new equity holders for the performance of the franchise obligations.
This requirement means that prospective Exit franchisees cannot shield themselves from liability by forming a business entity. The personal assets of the original signatories, and potentially other equity holders, are at risk if the franchise fails to meet its obligations. This is a common practice in franchising, as franchisors want to ensure that they have recourse to individuals with a vested interest in the success of the franchise.
For a prospective franchisee, this condition underscores the importance of carefully evaluating the financial risks associated with the Exit franchise. It is crucial to understand the full extent of the obligations under the Franchise Agreement and to assess one's personal financial capacity to meet those obligations. Seeking legal and financial advice before signing the agreement is highly recommended to fully understand the implications of personal liability.