For an Exit Realty Upper Midwest franchise, what documentation is required regarding the franchisee entity's organizational structure and ownership?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Franchisee is operating as a corporation, partnership or limited liability company, you must comply with the requirements of entity ownership set forth in Section 14 of the Franchise Agreement. Those requirements include:
- (a) You must execute a Personal Guaranty of the Franchise Agreement.
- (b) The Franchisee entity must be legally authorized to do business in the state where your Protected Territory is located.
- (c) You must provide EXIT Realty Upper Midwest with copies of the Franchise entity's organizational documents, such as Articles of Incorporation and Bylaws, Articles of Organization and Operating Agreement or Partnership Agreement, including a breakdown of ownership.
- (d) You must provide EXIT Realty Upper Midwest with a copy of any Buy-Sell Agreement between the equity holders of the Franchisee entity.
Source: Item 1 — THE FRANCHISOR AND SUBFRANCHISOR, AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 6–8)
What This Means (2025 FDD)
According to Exit Realty Upper Midwest's 2025 Franchise Disclosure Document, if a franchisee operates as a corporation, partnership, or limited liability company, they must provide specific documentation to Exit Realty Upper Midwest regarding the entity's organizational structure and ownership. This requirement ensures that Exit Realty Upper Midwest has a clear understanding of the franchisee's business structure and the individuals involved. These requirements are found in Section 14 of the Franchise Agreement.
The required documentation includes copies of the franchisee entity's organizational documents, such as Articles of Incorporation and Bylaws for a corporation, Articles of Organization and Operating Agreement for a limited liability company, or a Partnership Agreement for a partnership. These documents provide details about the entity's formation, structure, and governance. Additionally, the franchisee must provide a breakdown of ownership, clarifying who the owners or equity holders are and their respective ownership percentages.
Furthermore, if there is a Buy-Sell Agreement between the equity holders of the franchisee entity, a copy of this agreement must also be provided to Exit Realty Upper Midwest. A Buy-Sell Agreement typically outlines the procedures for transferring ownership interests in the event of certain triggering events, such as the death, disability, or departure of an owner. Finally, the franchisee must execute a Personal Guaranty of the Franchise Agreement and the Franchisee entity must be legally authorized to do business in the state where the Protected Territory is located.
These requirements are in place to protect Exit Realty Upper Midwest's interests and ensure compliance with legal and regulatory requirements. By requiring these documents, Exit Realty Upper Midwest can verify the legitimacy of the franchisee entity, understand its ownership structure, and assess the potential risks associated with the franchise relationship. Prospective franchisees should carefully review Section 14 of the Franchise Agreement and consult with legal counsel to ensure they can comply with these requirements.