Under what circumstances is an Exit franchisee prohibited from licensing the rights, duties, and obligations of the franchise agreement to a corporation, partnership, or limited liability company?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
chisor in writing a statement including appropriate evidence of compliance with all of the requirements of this Section 14 as may be reasonably requested by Subfranchisor. Subfranchisor's written consent to operate as a business entity shall be promptly given in the event of compliance with the requirements below. Nothing in this Agreement shall be construed as permitting Franchisee to license the rights, duties and obligations contained in this Agreement to a corporation, partnership or limited liability company without assignment made in accordance with Section 18 of this Agreement. If this Agreement is owned equally by spouses or partners, the spouses or partners shall provide Subfranchisor a written statement at the time this Agreement is signed, signed by both parties stating the name of the final decision maker.
14.2. Conditions of Entity Ownership
This Agreement is personal to the individual(s) signing as Franchisee. If Franchisee desires to do business as a corporation, partnership or limited liability company, EXIT or Subfranchisor will give its written consent to the assignment of this Agreement to such entity only under the following terms and conditions:
(A) If Franchisee is a corporation, partnership, or limited liability company, it must possess a valid real estate broker's License in the state or states where the Protected Territory is located.
(B) All individuals executing this Agreement shall remain personally liable for the performance of all obligations under this Agreement, irrespective of the formation of the entity and all equity holders of the assignee entity who have not signed this Agreement shall execute the Personal Guaranty in the form attached as Schedule 4.
(C) The assignee entity must be legally authorized to do business in the state(s) where the Protected Territory is located and shall at all times maintain itself in good standing in the state(s).
(D) The assignee entity shall not be engaged in any business endeavor whatsoever other than that which is primarily concerned with ownership and operation of the EXIT real estate service business as described in this Agreement.
(E) One of the individuals executing this Agreement must own or control at least fifty-one percent (51%) of the voting equity and, in the aggregate, at least fifty-one percent (51%) of all equity of the assignee entity, and retain ownership or control during the term of this Agreement.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, a franchisee is generally not allowed to license the rights, duties, and obligations of the franchise agreement to a corporation, partnership, or limited liability company without an assignment made in accordance with Section 18 of the agreement.
However, Exit or its subfranchisor may consent to the assignment of the agreement to such an entity under specific conditions. These conditions include the entity possessing a valid real estate broker's license in the relevant state, all individuals who originally signed the agreement remaining personally liable for its obligations, and all equity holders of the assignee entity who did not sign the original agreement executing a personal guaranty.
Additionally, the assignee entity must be legally authorized to do business in the relevant state and remain in good standing. The entity's business activities must be primarily focused on operating the Exit real estate service business. Furthermore, at least one of the individuals who originally signed the agreement must own or control at least 51% of the voting equity and at least 51% of all equity of the assignee entity, maintaining this ownership throughout the agreement's term. Finally, restrictions on transferring the interest must be conspicuously endorsed on each equity certificate and included in the governing documents of the entity.