Under the Exit franchise agreement, what constitutes an event of default that provides the Subfranchisor the right to terminate the agreement with a right to cure?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
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 a right to cure as described in Section 16.2:
(i) Franchisee, or any entity controlled by Franchisee or by one or more of the equity holders of Franchisee, fails to pay, when due, any of its financial obligations to EXIT, Subfranchisor, other EXIT subfranchisor, or the Brokers' Council, including payments due under any promissory note executed by Franchisee pursuant to the terms of this Agreement.
(ii) Franchisee, or any entity controlled by Franchisee or by one or more of the equity holders of Franchisee, breaches any term of this Agreement, any other agreement granting an EXIT franchise,
or any rule, procedure, amendment, or supplement to this Agreement established by EXIT or Subfranchisor, including but not limited to, the Performance Standards provisions of Section 9.8 of this Agreement.
(iii) Franchisee, directly or indirectly, sells, leases, assigns, transfers, conveys, gives away, pledges, mortgages or encumbers any interest in this Agreement, or in any way removes the franchise granted by this Agreement from the actual or legal supervision or control of Franchisee, or attempts to do any of same without the prior written consent of Subfranchisor; or if Franchisee is a corporation a partnership or other legal entity, if any interest in the entity is assigned or transferred without the prior written consent of the Subfranchisor.
(iv) Franchisee, or any entity controlled by Franchisee or by one or more of the equity holders of Franchisee, breaches any requirement, obligation, term, or condition of any other EXIT franchise agreement between Franchisee, or any entity controlled by Franchisee or by one or more of the equity holders of Franchisee, and Franchisor or any EXIT subfranchisor.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, there are several events of default that allow the Subfranchisor to terminate the franchise agreement with a right to cure. These events primarily involve failures related to financial obligations, breaches of the franchise agreement, and unauthorized transfers of interest in the agreement.
Specifically, the Subfranchisor can terminate the agreement if the franchisee, or any entity controlled by the franchisee, fails to pay financial obligations to Exit, the Subfranchisor, other Exit subfranchisors, or the Brokers' Council when due, including payments under any promissory note. Additionally, a breach of any term within the franchise agreement, any other agreement granting an Exit franchise, or any rule, procedure, amendment, or supplement established by Exit or the Subfranchisor, including performance standards, can lead to termination.
Furthermore, the Subfranchisor can terminate the agreement if the franchisee directly or indirectly sells, leases, assigns, transfers, conveys, gives away, pledges, mortgages, or encumbers any interest in the agreement without prior written consent. This also applies if the franchisee is a corporation, partnership, or other legal entity and any interest in that entity is assigned or transferred without the Subfranchisor's consent. Finally, breaching any term of any other Exit franchise agreement between the franchisee and the Franchisor or any Exit subfranchisor also constitutes an event of default with a right to cure.