Does the non-competition covenant for Exit Realty Upper Midwest apply during the term of the franchise?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| l. | EXIT Realty Upper Midwest's approval of transfer by Franchisee | 18 | EXIT Realty Upper Midwest has the right to approve all transfers but will not unreasonably withhold approval. |
|---|---|---|---|
| m. | Conditions for EXIT Realty Upper Midwest approval of transfer | 18 | New Franchisee qualifies, transfer fee (10% of the then current initial franchise fee, not to exceed 25% of the Initial Franchise fee paid) paid, purchase agreement approved, training arranged, Assignment signed and current Franchise Agreement signed by new Franchisor or Franchisee (also see the non-competition section below). |
| n. | EXIT Realty Upper Midwest's right of first refusal to acquire your business | Not Applicable | |
| o. | EXIT Realty Upper Midwest's option to purchase your business | Not Applicable | |
| p. | Your death or disability | 16 | Treated as a non-curable breach. See Section 18.4 for transferability provisions. |
| q. | Non-competition covenants during the term of the Franchise | 21 | Subject to state law, no involvement in competing business without Subfranchisor's prior written consent. |
| r. | Non-competition covenants after the Franchise is terminated or expires. | 21 | Subject to state law, no competing business similar to EXIT for 1 year within the area licensed by us from EXIT. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 27–31)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchise agreement includes a non-competition covenant that applies during the term of the franchise. This covenant is subject to state law and prohibits involvement in any competing business without the prior written consent of the subfranchisor, Exit Realty Upper Midwest. This means that as an Exit franchisee, you are restricted from engaging in any business activities that compete with Exit during the period you operate the franchise, unless you obtain explicit permission.
This restriction is fairly standard in franchising to protect the franchisor's brand and market share. However, the specific scope and enforceability of the non-compete agreement can vary significantly depending on the applicable state laws. Some states may have stricter rules regarding the enforceability of non-compete agreements, so it's important to understand the laws in your specific location.
In addition to the non-competition covenant during the franchise term, Exit also has a non-competition covenant that applies after the franchise is terminated or expires. This post-term covenant, also subject to state law, prevents you from engaging in a competing business similar to Exit for one year within the area licensed to you by Exit. Therefore, it is important to consult with a legal professional to fully understand the implications and enforceability of these non-competition covenants in your specific state.