Under the Exit agreement, what is the definition of 'Affiliate'?

According to Exit's 2025 Franchise Disclosure Document, an 'Affiliate' is defined as any person or entity that directly or indirectly owns or controls the referenced party, is directly or indirectly owned or controlled by the referenced party, or is under common control with the referenced party. The term 'control' is further defined as possessing the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract, or otherwise.

For a prospective Exit franchisee, this definition is important because it clarifies the scope of relationships that could be considered affiliated with the franchisee, franchisor, or other related entities. This could have implications for various aspects of the franchise agreement, including potential conflicts of interest, compliance requirements, and competitive restrictions. Understanding who is considered an affiliate helps a franchisee recognize potential obligations or limitations arising from these relationships.

The broad definition of 'Affiliate' used by Exit means that the franchisee needs to be aware of not only their direct business relationships but also the relationships of those who control or are controlled by them. This is a common practice in franchising, as franchisors seek to maintain consistent standards and protect their brand across all related entities. Franchisees should carefully consider this definition and how it might impact their business operations and relationships.

It is important for prospective franchisees to seek legal counsel to fully understand the implications of the 'Affiliate' definition within the context of the entire franchise agreement. This will help ensure they are aware of any potential risks or obligations associated with affiliated parties.