What restrictions must be conspicuously endorsed on each equity certificate for an Exit franchise?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (F) The following restrictions shall be conspicuously endorsed as a legend on each equity certificate, shall be indicated in the Bylaws, partnership agreement operating agreement, or other applicable governing document and shall be a part of any and all other agreements necessary in order to make the restrictions effective:
"The interest represented by this certificate is held subject to the terms and conditions of the EXIT Franchise Agreement with EXIT [trade name], Subfranchisor. Any encumbrance, assignment or transfer of the interest is subject to all restrictions imposed by the Franchise Agreement."
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee operates as a corporation, partnership, or limited liability company, specific restrictions must be conspicuously noted on each equity certificate. This endorsement serves as a clear warning to anyone holding or considering acquiring equity in the Exit franchise.
The required endorsement states: "The interest represented by this certificate is held subject to the terms and conditions of the EXIT Franchise Agreement with EXIT [trade name], Subfranchisor. Any encumbrance, assignment or transfer of the interest is subject to all restrictions imposed by the Franchise Agreement." This legend must also be included in the company's bylaws, partnership agreement, operating agreement, or any other governing documents to ensure the restrictions are fully enforceable.
This measure ensures that all equity holders are aware of the limitations and obligations imposed by the Exit Franchise Agreement. It prevents the transfer of equity to individuals or entities that have not agreed to or do not meet the franchisor's requirements. This protects Exit's interests by maintaining control over who can become involved in the franchise and ensuring compliance with the franchise agreement's terms.
For a prospective franchisee, this means that if they choose to operate their Exit franchise through a business entity, they must ensure that all equity certificates and governing documents include the specified restriction. This is a critical step in maintaining compliance with the franchise agreement and avoiding potential disputes or breaches.