Under what circumstances related to the transfer of interest in the Exit franchise agreement would a default occur with a right to cure?

According to Exit's 2025 Franchise Disclosure Document, a franchisee can face termination with a right to cure if they directly or indirectly sell, lease, assign, transfer, convey, give away, pledge, mortgage, or encumber any interest in the franchise agreement. This also applies if the franchisee removes the franchise from their actual or legal supervision or control, or attempts to do any of these actions, without the subfranchisor's prior written consent. If the franchisee is a corporation, partnership, or other legal entity, any assignment or transfer of interest in the entity without the subfranchisor's prior written consent also constitutes a default with a right to cure.

This means that an Exit franchisee needs to obtain written consent from the subfranchisor before making any changes to the ownership or control of the franchise. This includes not only outright sales or transfers but also actions like pledging the franchise as collateral for a loan. The requirement extends to changes in the ownership of the franchisee entity itself, such as the transfer of shares in a corporation.

The franchisee has the right to cure the default. The FDD states that the subfranchisor must provide notice to the franchisee of the default and allow them an opportunity to correct the issue. The specific length of the cure period and the process for curing the default are detailed elsewhere in the FDD, as referenced in Section 16.1(A).

Failure to obtain consent for a transfer can have serious consequences, potentially leading to termination of the franchise agreement. Therefore, it is crucial for prospective Exit franchisees to understand and comply with these transfer restrictions.