What are the implications of Exit not offering financing (Item 10) on the franchisee's estimated initial investment (Item 7)?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
initial investment is presently anticipated and estimated as follows:
| Type of Expenditure | Amount | Method of | When Due | To Whom | |
|---|---|---|---|---|---|
| Payment | Paid | ||||
| Initial Franchise Fee1 | $7,500 - $25,000 | Lump Sum | When you sign the Franchise Agreement | EXIT Realty Upper Midwest1 | |
| Training Expenses | $2,500-$5,000 | As Incurred | During Training | Airlines, Hotels and Restaurants | |
| Real Property – Leased for | $12,000- | As Billed | Prior to | Landlord | |
| 12 Months2 | $50,000 | Opening | |||
| Insurance3 | $2,000-$10,000 | As Billed | As Incurred | Insurance Company | |
| Equipment, Fixtures, Other Fixed Assets, Construction, Remodeling Leasehold Improvements & Decorating Costs4 | $10,000- $30,000 | As Billed | As Incurred | Vendors, Lessor | |
| Security Deposits, Utility Deposits, Business Licenses & Other Prepaid Expenses5 | $1,500-$5,000 (if applicable) | As Billed | As Incurred | State Authorities | |
| Exterior Office Sign | $500-$5,000 | As Billed | As Incurred | Vendors | |
| Automobile Lease6 | $4,800-$9,000 | As Billed | As Incurred | Vendors | |
| Additional Funds (6 months)7 | $20,000- $70,000 | As Needed | As Incurred | Vendors | |
| Total | $60,800- $209,000 | Note 1 EXIT Realty Upper Midwest retains 75% of the Initial Fee for a Franchise Agreement. EXIT is paid the remaining 25% of the Initial Fee. |
Note 2 You must lease at least 750 square feet for a rural density territory, 1,000 square feet in a low density territory, 1,500 square feet in a medium density territory and 2,000 square feet in a high density territory, in a suitable commercial building for your office. Because real estate values vary dramatically from location to location, we cannot accurately estimate your rent, but annual rental costs typically range from approximately $12.00 to $20.00, or more, per square foot for an office location. This is a gross rental that includes building operating expenses, insurance and real estate taxes. The Sales Representative quota set forth in Section 9.8 of the Franchise Agreement will require the office size to increase within the first 3 years of the lease. We estimate this will increase the annual rent to $36,000-$60,000. Franchise offices are usually located in the commercial center within your Protected Territory.
Note 3 The costs of insurance will vary depending on the number of employees and Sales Representatives, the location of your office and the value of the equipment and improvements.
Note 4 Equipment includes 2-4 computers, the requirements of which are set forth in Section 5 of ITEM 11 of this Disclosure Document. This amount also includes yard signs, sale and sold signs, business cards and office supplies.
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, because Exit does not offer direct or indirect financing, prospective franchisees must secure funding for the total estimated initial investment through their own means. This investment ranges from $60,800 to $209,000. This total includes various expenditures that begin with the initial franchise fee, which ranges from $7,500 to $25,000, and training expenses, which range from $2,500 to $5,000.
Without financing options from Exit, franchisees need to have sufficient capital or secure loans from external sources to cover costs such as real property leases, which can range from $12,000 to $50,000 for 12 months, insurance (between $2,000 and $10,000), and equipment/fixtures/remodeling (between $10,000 and $30,000). They also need to cover security and utility deposits, business licenses, prepaid expenses (between $1,500 and $5,000), exterior office signs ($500 to $5,000), and potentially an automobile lease ($4,800 to $9,000). A significant portion of the initial investment is allocated to additional funds for the first 6 months of operation, estimated between $20,000 and $70,000 to cover staff salaries, utilities, and operating expenses.
The lack of financing from Exit places the onus on the franchisee to manage their cash flow effectively from the outset. The FDD notes that none of the amounts described in Item 7 are refundable from Exit, so franchisees need to carefully consider their financial planning and risk assessment. The initial investment estimate does not include an owner's salary or draw, which means franchisees need to factor in personal living expenses during the initial phase. The document also states that these figures are estimates and can vary based on geographic area, adherence to Exit's methods, management skills, economic conditions, and competition. Therefore, franchisees should conduct thorough due diligence and possibly consult with financial advisors to prepare for potential additional expenses.