Is the non-competition covenant after termination or expiration of the Exit Realty Upper Midwest franchise subject to state law?
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. | | s. | Modification of the Agreement | 28 | Fees are subject to change by Franchisor. The Manuals are subject to change. | | t. | Integration/merger clause | 28 | Only the terms of the Agreement are binding (subject to state law). Any other promises may not be enforceable. Any representations or promises outside of this Disclosure Document and the Franchise Agreement may not be enforceable. | | u. | Dispute resolution by arbitration or mediation | 25 | Subject to state law, all disputes must be litigated in Lakeville, MN | | v. | Choice of forum | 25 | Subject to applicable state law, all disputes must be litigated Lakeville, MN | | w. | Choice of law | 25 | Subject to applicable state law, Minnesota | The following states have statutes which may supersede the Agreements in your relationship with EXIT including the areas of termination and renewal of your Franchise and venue for disputes and governing law: ARKANSAS [Ark. Code § 4-72-204], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.], DELAWARE [Code, tit. 6, Ch.25, Sections 2551, et seq.], HAWAII [Rev. Stat. Section 482], ILLINOIS [Rev. Stat. Chapter 815 ILCS 705/1-44], INDIANA [Stat.
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 non-competition covenant after the franchise is terminated or expires is subject to state law. Specifically, franchisees are restricted from engaging in a competing business similar to Exit for one year within the area licensed by the franchisor. This means that the enforceability and specific terms of the non-compete agreement can vary depending on the state in which the franchise operates, as state laws govern the scope and enforceability of such covenants.
Item 17 of the Exit FDD also lists several states, including Arkansas, California, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, Rhode Island, Tennessee, Virginia, Washington, and Wisconsin, that have statutes which may supersede the agreements in the franchisee's relationship with Exit. These statutes can affect areas such as termination and renewal of the franchise, venue for disputes, and governing law. This implies that franchisees in these states should be particularly aware of how their state's laws may modify or override the standard franchise agreement terms, including the non-compete provisions.
Prospective Exit franchisees should consult with legal counsel to understand the specific non-compete laws in their state and how they apply to the Exit franchise agreement. This is crucial for assessing the potential restrictions and obligations they will face both during and after the franchise term. Understanding these state-specific nuances is essential for making an informed decision about investing in an Exit franchise.