Under what circumstances can the Exit Subfranchisor terminate the agreement immediately upon notice without providing an opportunity to cure?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
- (B) No Right to Cure.
Set forth below are events of default which, upon their occurrence, shall give Subfranchisor the right to terminate this Agreement after notice to Franchisee and with no right to cure, as described in Section 16.2:
(i) Franchisee fails to open its EXIT office and commence business operations within one hundred and twenty (120) days of the date of this Agreement.
(ii) Franchisee voluntarily abandons the franchise by failing to operate the franchise in accordance with the terms of this Agreement, within the Protected Territory for a period of ten (10) consecutive days, or for twenty (20) days in any period of thirty (30) consecutive days, unless such failure is due to fire, flood, earthquake or similar cause beyond Franchisee's control.
(iii) Franchisee fails to comply with the provisions of this Agreement three (3) or more times, whether or not corrected after notice.
(iv) Franchisee or any of its equity holders, directors or officers are convicted of a felony or other crime that, in the reasonable judgment of Subfranchisor, impairs the goodwill associated with the Proprietary Marks.
(v) The filing of a voluntary or involuntary petition under any bankruptcy or insolvency law or a petition for the appointment of a receiver, or an assignment for the benefit of creditors, if Franchisee or a guarantor of this Agreement is subject to the action.
(vi) Franchisee or a guarantor of this Agreement dies or becomes Permanently Disabled, or if Franchisee or a guarantor is a corporation, limited liability company or other entity other than an individual, such Franchise or guarantor dissolves.
(vii) Misuse of escrow or trust funds by Franchisee.
(viii) Violation of the In-Term Covenant Not To Compete provisions described in Section 21.1 of this Agreement.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the subfranchisor can terminate the franchise agreement immediately without giving the franchisee an opportunity to cure under specific circumstances. These circumstances include failing to open the Exit office within 120 days of the agreement date, voluntarily abandoning the franchise, or repeatedly failing to comply with the agreement's provisions. Specifically, if a franchisee fails to comply with the agreement three or more times, regardless of whether the issues were corrected after notice, the subfranchisor can terminate the agreement immediately.
Additionally, immediate termination is possible if the franchisee or any equity holders, directors, or officers are convicted of a felony that impairs the goodwill associated with Exit's Proprietary Marks. The subfranchisor can also immediately terminate the agreement if a voluntary or involuntary petition is filed under any bankruptcy or insolvency law, or if there is an assignment for the benefit of creditors involving the franchisee or a guarantor of the agreement. Furthermore, the death or permanent disability of the franchisee or a guarantor, or the dissolution of the franchisee entity if it is a corporation, LLC, or other entity, also allows for immediate termination.
Finally, the subfranchisor can terminate the agreement immediately if the franchisee misuses escrow or trust funds or violates the in-term covenant not to compete. These 'no right to cure' defaults represent significant risks for franchisees, as any of these events can lead to immediate termination of the franchise agreement and loss of the franchise. Prospective franchisees should carefully consider these termination conditions and ensure they have the resources and ability to comply with all terms of the franchise agreement to avoid such defaults.