Under what conditions will Exit or the Subfranchisor consent to the assignment of the Franchise Agreement to a corporation, partnership, or limited liability company?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
(F) The following restrictions shall be conspicuously endorsed as a legend on each equity certificate, shall be indicated in the Bylaws, partnership agreement operating agreement, or other applicable governing document and shall be a part of any and all other agreements necessary in order to make the restrictions effective:
"The interest represented by this certificate is held subject to the terms and conditions of the EXIT Franchise Agreement with EXIT [trade name], Subfranchisor. Any encumbrance, assignment or transfer of the interest is subject to all restrictions imposed by the Franchise Agreement."
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if a franchisee wishes to operate as a corporation, partnership, or limited liability company, Exit or its subfranchisor will provide written consent to assign the Franchise Agreement to such an entity, but only under specific terms and conditions. These conditions are designed to ensure that the integrity and obligations of the franchise agreement are maintained even with the change in business structure.
One key condition is that if the franchisee is a corporation, partnership, or limited liability company, it must possess a valid real estate broker's license in the state(s) where the protected territory is located. Additionally, all individuals who initially signed the Franchise Agreement must remain personally liable for all obligations, regardless of the entity's formation. Equity holders who did not sign the original agreement must execute a personal guaranty. The assignee entity must be legally authorized to conduct business in the relevant state(s) and remain in good standing.
Furthermore, the assignee entity's business activities must be primarily focused on the ownership and operation of the Exit real estate service business. At least one of the individuals who originally signed the agreement must retain ownership or control of at least 51% of the voting equity and at least 51% of all equity of the assignee entity throughout the term of the agreement. Finally, restrictions on equity certificates and governing documents must be conspicuously endorsed to indicate that the interest is subject to the terms and conditions of the Exit Franchise Agreement, including restrictions on encumbrance, assignment, or transfer.