What specific actions or inactions by the Exit Franchisee might lead to losses suffered by the Subfranchisor, requiring full compensation?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
For purposes of this paragraph, full compensation shall include full payment of any losses suffered by Subfranchisor due to Franchisee's actions or inaction, and adequate assurances or prompt and full compensation shall include, at a minimum, immediate presentation to Subfranchisor by Franchisee of an irrevocable letter of credit in an amount sufficient for full compensation of Subfranchisor (as defined above), issued to the account of Franchisee by a commercial bank, payable to Subfranchisor, at sight, within thirty (30) days from the date thereof, upon presentation of any affidavit signed by Subfranchisor stating that Subfranchisor is entitled to payment pursuant to this Agreement.
- (B) Termination of this Agreement by Subfranchisor shall not terminate any monetary obligations owed by Franchisee to EXIT, Subfranchisor or the Brokers' Council.
Termination of this Agreement by Subfranchisor shall not be an exclusive remedy and shall not in any way affect the rights of EXIT or Subfranchisor to receive, or collect fees or other amounts payable by Franchisee under this Agreement, to enforce the provisions of this Agreement against Franchisee, to sue for damages, seek and obtain ex parte injunctive relief, to pursue any other equitable remedy for breach of this Agreement by Franchisee or otherwise constitute a waiver of any of Subfranchisor's other rights upon the occurrence of an Event of Default.
Subfranchisor shall not be obligated following any such termination or cancellation, to refund any amount previously paid by Franchisee under the terms of this Agreement.
(C) Notwithstanding the above, if Franchisee fails to correct an alleged breach of this Agreement within the applicable time period after receipt of written notice from Subfranchisor, Subfranchisor will also have the right, upon written notice to Franchisee, to: (1) terminate the territorial exclusivity of the Protected Territory; or (2) reduce the size of the Protected Territory.
(D) Nothing in this Section 16 will preclude Subfranchisor from seeking other remedies against Franchisee under state or federal laws or under this Agreement, including, but not limited to, recovery of attorneys' fees, punitive damages and injunctive relief.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the franchisee may be required to provide full compensation to the subfranchisor for losses resulting from the franchisee's actions or inaction. This compensation includes covering all losses incurred by the subfranchisor. To ensure prompt compensation, the franchisee must immediately present an irrevocable letter of credit to the subfranchisor. This letter of credit should be issued by a commercial bank, payable to the subfranchisor upon sight, and must be presented within 30 days of the subfranchisor's affidavit stating entitlement to payment. The letter of credit must be sufficient to cover the full compensation owed to the subfranchisor.
Termination of the franchise agreement by the subfranchisor does not relieve the franchisee of any monetary obligations to Exit, the subfranchisor, or the Brokers' Council. The subfranchisor's right to terminate is not an exclusive remedy, and it does not prevent Exit or the subfranchisor from collecting fees or other amounts owed by the franchisee under the agreement. The subfranchisor can still enforce the agreement, sue for damages, seek injunctive relief, or pursue other equitable remedies if the franchisee breaches the agreement. The subfranchisor is not obligated to refund any amounts previously paid by the franchisee, even after termination or cancellation.
If the franchisee fails to correct a breach of the agreement within the specified time after receiving written notice from the subfranchisor, the subfranchisor has the right to terminate the territorial exclusivity of the protected territory or reduce its size. The subfranchisor can also seek other remedies against the franchisee under state or federal laws or the agreement, including recovery of attorneys' fees, punitive damages, and injunctive relief. These provisions ensure that the subfranchisor has multiple avenues to address breaches and protect its interests, and that the franchisee is held accountable for their actions or inactions that cause losses to the subfranchisor.