What is the role of the Subfranchisor in relation to Exit and the Franchisee?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
r such assistance as may be requested, and will promptly remedy all deficiencies identified by EXIT or Subfranchisor, whether or not they are identified in a formal notice of default or notice to cure.
12. OBLIGATIONS OF SUBFRANCHISOR
12.1. Initial Obligations
Prior to the opening of the franchise business, Subfranchisor will make available to Franchisee, one (1) copy of Training Manual, together with any amendments to the manual. The manual will include standard operating procedures and quality control directives designed to familiarize Franchisee with the System and better enable it to run an efficient office. The manual will also include requirements governing the use and specification of all logos, trademarks and other sales promotional materials.
12.2. Continuing Obligations
(A) During the operation of the franchise business, Subfranchisor shall make available to Franchisee, upon request, consulting services relating to the operation of its real estate services business as Subfranchisor deems appropriate and necessary, upon such terms and conditions as the parties may agree.
(B) Subfranchisor shall encourage the use of the EXIT real estate services on an international basis by members of the public.
(C) Subfranchisor shall maintain reasonable supervision over Franchisee as often as Subfranchisor shall deem necessary, to assure compliance with the System and any supplemental quality control standards as established by EXIT and Subfranchisor from time to time, and to provide guidance in the management and operations of Franchisee's office.
(D) Subfranchisor shall make available to Franchisee, the System's operating procedures, directives, and standards relating to signs, letterheads, sales promotions, office designs and other similar materials to the extent and in the manner that such materials are made available to it by EXIT or as are approved by EXIT.
(E) Subfranchisor shall limit the offering of EXIT Realty Corp. franchises to persons or entities who possess a valid real estate broker's license.
(F) In the event Subfranchisor's interest in this Agreement expires or is terminated by EXIT, for whatever reason, Subfranchisor's interest in this Agreement shall transfer to EXIT. Thereafter, EXIT or its Assignee, shall assume Subfranchisor's obligations under this Agreement.
13. RELATIONSHIP OF PARTIES
13.1. Independent Contractor
Franchisee is and shall be an independent contractor, and nothing contained in this Agreement shall be construed to create a partnership, joint venture, employment or other relationship between parties. Neither Subfranchisor nor Franchisee shall act as an agent for the other or as guarantor or surety for the obligations of the other. Neither party shall be obligated for the debts or expenses of the other. Franchisee does not have the authority to bind or obligate EXIT or Subfranchisor in any way by any promise or representation.
13.2. Subfranchisor
It is understood that Subfranchisor has been granted a license by EXIT to grant franchises and enforce EXIT's rights in the Proprietary Marks in a specified territory which includes the Protected Territory.
14. FORM OF OWNERSHIP
14.1. In General
Individuals desiring to do business as a corporation, partnership, or limited liability company shall submit to Subfranchisor in writing a statement including appropriate evidence of compliance with all of the requirements of this Section 14 as may be reasonably requested by Subfranchisor. Subfranchisor's written consent to operate as a business entity shall be promptly given in the event of compliance with the requirements below. Nothing in this Agreement shall be construed as permitting Franchisee to license the rights, duties and obligations contained in this Agreement to a corporation, partnership or limited liability company without assignment made in accordance with Section 18 of this Agreement. If this Agreement is owned equally by spouses or partners, the spouses or partners shall provide Subfranchisor a written statement at the time this Agreement is signed, signed by both parties stating the name of the final decision maker.
14.2. Conditions of Entity Ownership
This Agreement is personal to the individual(s) signing as Franchisee. If Franchisee desires to do business as a corporation, partnership or limited liability company, EXIT or Subfranchisor will give its written consent to the assignment of this Agreement to such entity only under the following terms and conditions:
- (A) If Franchisee is a corporation, partnership, or limited liability company, it must possess a valid real estate broker's License in the state or states where the Protected Territory is located.
- (B) All individuals executing this Agreement shall remain personally liable for the performance of all obligations under this Agreement, irrespective of the formation of the entity and all equity holders of the assignee entity who have not signed this Agreement shall execute the Personal Guaranty in the form attached as Schedule 4.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the Subfranchisor plays a significant role in the relationship between Exit and the Franchisee. The Subfranchisor has initial obligations to the Franchisee, including providing a copy of the Training Manual with standard operating procedures and quality control directives. This manual helps the Franchisee understand the Exit System and operate their office efficiently. The manual also specifies the use of logos, trademarks, and sales promotional materials.
Furthermore, the Subfranchisor has continuing obligations during the operation of the franchise. They must offer consulting services to the Franchisee upon request, supervise the Franchisee to ensure compliance with the Exit System and quality control standards, and provide guidance in managing the Franchisee's office. The Subfranchisor also makes available the System's operating procedures, directives, and standards for various materials, as provided or approved by Exit. The Subfranchisor is responsible for limiting franchise offerings to individuals with a valid real estate broker's license. If the Subfranchisor's agreement with Exit is terminated, their obligations transfer to Exit.
The Exit FDD also states that Exit and the Subfranchisor have the right to inspect and audit the Franchisee's books, records, and procedures to ensure compliance with the agreement. They can conduct regular inspections at reasonable times. The Franchisee is expected to cooperate with these inspections and promptly address any deficiencies identified. Additionally, the Franchisee acknowledges that the Subfranchisor has strongly recommended that they seek legal counsel to review the franchise agreement and related documents. The Subfranchisor can terminate the Franchise Agreement if the Franchisee defaults, such as by failing to meet financial obligations or breaching the agreement, and can seek injunctive relief to enforce the agreement's provisions.