If an Exit franchisee dies, is the transfer of the franchise to a designated beneficiary automatically approved, or are there conditions that must be met?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee dies or becomes permanently disabled, the franchise agreement or the guarantor's interest in the entity that owns the agreement may be transferred or bequeathed to a designated person or beneficiary. However, this transfer is not automatic. The subfranchisor must approve the designated person or beneficiary, and the transfer is subject to the conditions outlined in Section 18.3 of the agreement.
Section 18.3 lists several conditions that must be met for the transfer to be approved. These include the franchisee fully complying with the agreement, curing all defaults, and paying all monies due to Exit, the subfranchisor, and the Brokers' Council. Additionally, the franchisee must submit financial statements and other documents to allow the subfranchisor to assess the transferee's character, integrity, creditworthiness, business experience, net worth, professional credentials, and ethical background. The franchisee must also provide copies of the transfer documents, complete financial information on the franchise, and a general release and waiver in favor of the subfranchisor and Exit.
Furthermore, the proposed transferee must sign the subfranchisor's current form of Guaranty of the agreement and complete the required training. The disposition of the franchise must be completed within a reasonable time, not exceeding 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 agreement. This means that while Exit allows for the transfer of the franchise to a beneficiary upon the franchisee's death or disability, it imposes several conditions to ensure the continued successful operation of the franchise.
In summary, an Exit franchisee can designate a beneficiary to receive the franchise, but the transfer is not automatic. The beneficiary must be approved by the subfranchisor and meet all the conditions listed in Section 18.3 of the Franchise Agreement. The estate has up to nine months to complete the transfer, or it will be considered a breach of contract.