Can Exit Realty Upper Midwest establish a company-owned or franchised outlet in the Protected Territory selling similar services under different trademarks than Exit?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement provides that EXIT Realty Upper Midwest may not establish either a company-owned or franchised outlet, in the Protected Territory, selling the same goods or similar goods or services under the same or similar trademarks or service marks during the term of the Franchise Agreement, unless you are in default under the terms of the Franchise
Agreement. Your exclusive rights to a Protected Territory may be terminated or modified by EXIT Realty Upper Midwest if you fail to comply with the terms and conditions of the Franchise Agreement. In addition, the exclusive area rights will terminate, and you will be in default under your Franchise Agreement and your Franchise Agreement may be terminated, if you fail to attain and retain the prescribed number of Sales Representatives within the designated period of time. There are no other circumstances that permit EXIT Realty Upper Midwest to modify your territorial rights. The number of Sales Representatives to be maintained is based on the active Realtor® population in the geographic territory that includes the Protected Territory and based upon market conditions and area competition. There is no formula to determine the minimum number of Sales Representatives to be maintained in a Protected Territory. Once the location of the Protected Territory is determined and EXIT Realty Upper Midwest analyzes the active Realtor® population, market conditions and area competition in and around the Protected Territory, the minimum number of Sales Representatives is determined by EXIT Realty Upper Midwest and provided to you not less than 7 calendar days prior to your execution of the Franchise Agreement. See Section 9.8 of the Franchise Agreement. Subject to the foregoing Requirements for minimum number of Sales Representatives are as follows:
Source: Item 12 — TERRITORY (FDD pages 24–25)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Exit Realty Upper Midwest is restricted from establishing either a company-owned or franchised outlet within a franchisee's protected territory if it involves selling the same or similar goods or services under the same or similar trademarks during the term of the Franchise Agreement, unless the franchisee is in default. This provision offers a degree of territorial protection to Exit franchisees. However, Exit, Exit Realty Upper Midwest, and other Exit Realty franchisees retain the right to use other channels of distribution, including the internet, within the protected territory, even using different trademarks.
This means that while Exit Realty Upper Midwest cannot directly compete with an Exit franchisee by opening a competing physical location under a similar brand, they can still market and sell real estate services within the franchisee's territory through online channels or other methods, potentially under different brand names. This is a common practice in franchising, where franchisors balance the need to protect franchisees' territories with their own ability to reach customers through various channels.
It is important to note that the franchisee's exclusivity within the Protected Territory relates only to the operation of an Exit office. Other Exit franchises may provide real estate services within the franchisee's Protected Territory, and no compensation is paid to the franchisee for real estate sales by other Exit franchises within their Protected Territory. This highlights that the territorial protection is limited to the specific Exit office location and does not extend to all real estate activities within the territory.
Prospective franchisees should be aware of these limitations and understand that while they have a protected territory for their Exit office, they may still face competition from other Exit franchisees and from Exit Realty Upper Midwest through alternative channels of distribution. It is crucial to carefully evaluate the potential for competition within the protected territory and to develop strategies to effectively compete in the local market.