If the Exit Franchisee fails to execute individual assignments of Franchise Agreements and Approved Supplier Agreements promptly upon expiration or termination, what is deemed to occur?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon expiration or termination of this Agreement for whatever reason, at Subfranchisor's request, Franchisee shall immediately assign to Subfranchisor all of its right, title, and interest in and to Franchise Agreements and Approved Supplier Agreements which have been entered into by Franchisee within the Protected Territory. In the event that Franchisee shall fail to execute individual assignments of the Franchise Agreements and Approved Supplier Agreements to Subfranchisor promptly upon expiration or termination of this Agreement, the parties agree that the provisions of this section shall in such instance be deemed to constitute an absolute assignment by Franchisee of all of its right, title, and interest in each such EXIT Realty Corp. Franchise Agreement and Approved Supplier Agreement to Subfranchisor or its designee.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee fails to promptly execute individual assignments of Franchise Agreements and Approved Supplier Agreements to the subfranchisor upon the expiration or termination of the franchise agreement, it is deemed an absolute assignment. This means that the franchisee's rights, title, and interest in each Exit Realty Corp. Franchise Agreement and Approved Supplier Agreement automatically transfer to the subfranchisor or their designee.
This provision ensures a smooth transition of franchise operations and supplier relationships when a franchise agreement ends. By treating the failure to execute assignments as an automatic transfer, Exit aims to avoid any disruption to the business and maintain control over its franchise network and supplier agreements. This is particularly important for maintaining consistency and quality within the Exit system.
For a prospective franchisee, this clause highlights the importance of understanding and complying with the terms of the franchise agreement regarding assignments upon termination or expiration. Failure to promptly execute the required documents can result in an immediate and involuntary transfer of valuable rights and interests to the subfranchisor. Franchisees should be aware of this potential outcome and ensure they are prepared to fulfill their obligations in a timely manner to avoid any unintended consequences.