During the term of the Exit Realty Upper Midwest franchise, can I be involved in a competing business?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| l. | EXIT Realty Upper Midwest's approval of transfer by Franchisee | 18 | EXIT Realty Upper Midwest has the right to approve all transfers but will not unreasonably withhold approval. |
|---|---|---|---|
| m. | Conditions for EXIT Realty Upper Midwest approval of transfer | 18 | New Franchisee qualifies, transfer fee (10% of the then current initial franchise fee, not to exceed 25% of the Initial Franchise fee paid) paid, purchase agreement approved, training arranged, Assignment signed and current Franchise Agreement signed by new Franchisor or Franchisee (also see the non-competition section below). |
| n. | EXIT Realty Upper Midwest's right of first refusal to acquire your business | Not Applicable | |
| o. | EXIT Realty Upper Midwest's option to purchase your business | Not Applicable | |
| p. | Your death or disability | 16 | Treated as a non-curable breach. See Section 18.4 for transferability provisions. |
| q. | Non-competition covenants during the term of the Franchise | 21 | Subject to state law, no involvement in competing business without Subfranchisor's prior written consent. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 27–31)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, whether you can be involved in a competing business during the term of your Exit Realty Upper Midwest franchise is restricted. Item 17 outlines non-competition covenants during the franchise term, stating that, subject to state law, involvement in a competing business is not allowed without the subfranchisor's prior written consent. This means that as a franchisee, you are generally prohibited from engaging in any business that directly competes with Exit during the period you operate the franchise.
This restriction is common in franchising to protect the brand and market share of the franchisor. However, the clause is subject to state law, meaning the enforceability and specific terms can vary depending on the state where the franchise is located. Some states may have stricter regulations regarding non-compete agreements, potentially impacting the breadth and enforceability of this clause.
It is important for prospective Exit franchisees to seek legal counsel to understand how state laws may affect the non-compete agreement in their specific location. Furthermore, franchisees should carefully review the franchise agreement and discuss with Exit the scope and limitations of the non-competition covenant to fully understand what activities are considered competitive and what the potential consequences are for violating this provision. Obtaining prior written consent from the subfranchisor is essential if a franchisee wishes to engage in any business activity that could be construed as competitive.