Is Subfranchisor's consent required for a Franchisee to transfer their interest in the Exit franchise?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
The rights and duties set forth in this Franchise Agreement are personal to Franchisee, if an individual, and to the guarantors of this Agreement, and Subfranchisor has granted this franchise in reliance of Franchisee's and guarantor's representations as to its business skill, financial capacity, and personal character. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this franchise, nor any individual, partnership, corporation, or other legal entity which directly or indirectly owns any interest in this franchise shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber any direct or indirect interest in the Franchisee or this Agreement, or all or a substantial portion of the assets of the franchise business ("Transfer") without prior written consent of Subfranchisor, as provided in Section 18.3 below. Any
unauthorized Transfer, whether voluntary, involuntary, by operation of law or otherwise, or any attempt to do so, shall be deemed void and be grounds for termination of this Agreement by Subfranchisor.
18.3. Consent to Transfer Conditions
Subfranchisor will not unreasonably withhold its consent, which consent must be in writing, to any proposed Transfer, provided Franchisee and/or the transferee comply with the following, non-exclusive, conditions:
- (A) Franchisee shall have fully complied with the provisions of this Agreement, curing all defaults and noncompliance under this Agreement and any other franchise agreements it may have with Subfranchisor and EXIT; and
- (B) Franchisee shall have paid fully all monies due EXIT, Subfranchisor, and Brokers' Council; and
- (C) Franchisee shall submit to Subfranchisor current, accurate financial statements and other documents sufficient to enable Subfranchisor to determine and approve (in its discretion) the character, integrity, creditworthiness, business experience, reasonable net worth, professional credentials and ethical background of the proposed transferee; and
- (D) Franchisee shall furnish Subfranchisor with copies of the transfer documents, in a form acceptable to Subfranchisor; and
- (E) Franchisee shall provide both the proposed transferee and Subfranchisor complete financial information on the subject franchise required by the transferee; and
- (F) Franchisee shall provide Subfranchisor, on the then current form prescribed by Subfranchisor or EXIT, a full general release and waiver in favor of Subfranchisor, EXIT and their affiliates; and
- (G) Franchisee shall pay the transfer fee required under Section 18.5;
- (H) The proposed transferee shall sign Subfranchisor's then current form of Guaranty of this Agreement; and
- (I) The proposed transferee shall complete, or agree to complete, the training required under Section 9.11.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, a franchisee needs prior written consent from the subfranchisor to transfer any interest in the franchise. This includes selling, assigning, or otherwise encumbering any direct or indirect interest in the franchise or the franchise agreement. Any unauthorized transfer is considered void and can be grounds for termination of the agreement by the subfranchisor.
However, the subfranchisor cannot unreasonably withhold consent to a proposed transfer, provided that the franchisee and the potential transferee meet certain conditions. These conditions include the franchisee fully complying with the agreement, curing all defaults, and paying all monies due to Exit, the subfranchisor, and the Brokers' Council. The franchisee must also submit accurate financial statements and other documents to allow the subfranchisor to assess the transferee's character, creditworthiness, and business experience.
Additional requirements include providing copies of the transfer documents, complete financial information on the franchise, and a general release and waiver in favor of the subfranchisor and Exit. The transferee must also sign the subfranchisor's current form of Guaranty Agreement and complete the required training. Furthermore, the franchisee must pay the transfer fee. These conditions ensure that the subfranchisor maintains control over who operates an Exit franchise and that the standards of the franchise system are upheld, which is a fairly standard practice in franchising.