After the Exit Realty Upper Midwest franchise is terminated or expires, what is the geographic scope of the non-competition covenant?
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, if the Exit Realty Upper Midwest franchise is terminated or expires, the franchisee is subject to a non-competition covenant. This means that for one year after the termination or expiration, the franchisee cannot engage in a competing business similar to Exit within the specific geographic area that was licensed to them by Exit. The non-compete covenant is subject to state law, which may impact its enforceability. Prospective franchisees should carefully consider the geographic scope of their licensed area and the potential impact of this non-compete agreement on their future business activities.
It is important to note that the enforceability of non-competition covenants can vary significantly by state. Some states have laws that restrict or prohibit such covenants, while others are more lenient. The FDD also mentions that several states have statutes that may supersede the agreements in the franchisee's relationship with Exit, including areas of termination and renewal of the franchise.
Therefore, a prospective Exit franchisee should consult with an attorney to understand the specific laws in their state regarding non-competition agreements and how they might apply to the Exit franchise agreement. Understanding the geographic scope and enforceability of the non-compete is crucial for planning future business ventures after the franchise term.