What section of the Exit franchise agreement addresses the covenant not to compete?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
confidence, shall not use or disclose such Confidential Information (except in the performance of this Agreement), shall diligently protect any and all Confidential Information against loss by inadvertent or unauthorized disclosure, and shall comply with guidelines established by EXIT and Subfranchisor for the purpose of protecting the information.
21. FRANCHISEE'S COVENANTS NOT TO COMPETE
21.1. In-Term Covenant Not to Compete
Franchisee and Franchisee's shareholders, partners, members, directors, officers and guarantors of this Agreement will not, during the term of this Agreement and all renewals and extensions of this Agreement, on their own account or as an employee, agent, consultant, partner, officer, director or shareholder of any other person, firm, entity, partnership or corporation, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in any real estate business, or
other related business that is in any way competitive with or similar to the business conducted by EXIT or EXIT subfranchises or franchises, nor offer products or services that are offered by EXIT.
21.2. Post-Term Covenants
Franchisee and Franchisee's shareholders, partners, members, directors, officers and guarantors of this Agreement will not, for a period of one (1) year following the termination, assignment or expiration of this Agreement on their own account or as an employee, agent, consultant, partner, officer, director or shareholder of any other person, firm, entity, limited liability company, partnership or corporation, directly or indirectly,
- (a) within a ten (10) mile radius of Franchisee's office, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in any real estate brokerage business, which business utilizes at any location a reward system for "sponsoring" sales representatives at any of its locations, or in any other way operates substantially similar manner to the EXIT System; or
- (b) within a ten (10) mile radius of Franchise's office own, operate, lease, franchise, conduct or engage in, be connected with, have any interest in or assist any person or entity engaged in any real estate brokerage business, provided the foregoing shall not apply if this Agreement expired at the end of its term.
- (c) solicit or induce any person who is, at the time of termination or expiration of this Agreement, retained as a sales representative (as the phrase "sales representative is defined in the EXIT Formula attached to this Agreement, which may from time to time be amended at the discretion of EXIT) of any EXIT franchisee to stop serving as an agent for that party; or
- (d) within the state(s) in which the Protected Territory is located, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in the business of selling, managing or servicing real estate franchise organizations, irrespective of whether services are provided directly to the franchising operations or the System's franchisee's; or
- (e) solicit or induce any person who is, at the time of termination or expiration of this Agreement an EXIT franchisee or an equity-holder in any entity which is, at the time of termination or expiration of this Agreement an EXIT franchisee, to terminate or not renew his relationship with EXIT or Subfranchisor; or
- (f) divert, or attempt to divert, any business or customer of an EXIT Franchisee, to any competitor; or
- (g) do or perform any other act injurious or prejudicial to the goodwill associated with the EXIT System.
The parties expressly agree that the covenants contained in this section are each independent and are reasonable and necessary to protect Subfranchisor and other EXIT franchises if this Agreement expires or is terminated for any reason.
21.3. Reasonableness
The parties expressly agree that the limitations contained in this Section 21 are reasonable and necessary to protect Subfranchisor and other EXIT franchises if this Agreement expires or is terminated for any reason.
**21.4.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchisee's covenants not to compete are addressed in Section 21 of the franchise agreement. This section outlines restrictions both during the term of the agreement and after its termination, assignment, or expiration.
During the term of the agreement, franchisees (and related parties like shareholders and officers) are prohibited from engaging in any real estate business or related activities that compete with Exit. This includes owning, operating, or being connected with any competitive real estate business or offering similar products and services.
After the agreement ends, the restrictions continue for one year. These post-term covenants prevent franchisees from engaging in a real estate brokerage business within a 10-mile radius of their former office, soliciting Exit's sales representatives, or engaging in activities that could harm the goodwill of the Exit system. The agreement specifies that these covenants are considered reasonable and necessary to protect Exit and its other franchises. The agreement also states that if the franchise agreement is governed by California law, then the covenant not to compete upon termination or expiration of this Agreement contained in Section 21 may be unenforceable, except in certain circumstances provided by law.
Exit also has the right to seek injunctive relief to enforce these covenants, preventing damage to its brand and business interests. Franchisees should carefully review Section 21 to understand the full scope of these restrictions and their implications for future business activities.