Under Minnesota law, as it pertains to the Exit franchise agreement, who determines whether the subfranchisor will be required to post a bond in any injunctive proceeding?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
If this Agreement is governed by the laws of the State of Minnesota, then: (1) Section 16 will be amended to require that in the event Subfranchisor provides the Franchisee with written notice that Franchisee has breached this Agreement, such written notice will be provided to Franchisee at least ninety (90) days prior to the date this Agreement is terminated by the Subfranchisor, and Franchisee will have sixty (60) days after receipt of such written notice within which to correct the breach specified in the written notice; (2) notwithstanding any provision of this Agreement to the contrary, a court of competent jurisdiction will determine whether Subfranchisor will be required to post a bond or other security, and the amount of such bond or other security, in any injunctive proceeding commenced by Subfranchisor against Franchisee, Franchisee's shareholders or the partners or members, as the case may be; and (3) Subfranchisor will protect Franchisee's right to use the Proprietary Marks and/or indemnify Franchisee from any loss, costs or expenses arising out of any claim, suit or demand regarding use of the Proprietary Marks.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the franchise agreement is governed by Minnesota law, a court of competent jurisdiction will determine whether the subfranchisor is required to post a bond or other security in any injunctive proceeding commenced against the franchisee, their shareholders, partners, or members. The court will also determine the amount of such bond or security. This stipulation overrides any conflicting provisions in the franchise agreement.
This means that Exit franchisees in Minnesota have the benefit of a court's assessment regarding the necessity and amount of a bond should Exit seek an injunction. This is important because it ensures an impartial decision on whether a bond is required to protect the franchisee from potential damages if the injunction is later found to be unwarranted.
Typically, franchise agreements may include clauses that waive the requirement for the franchisor to post a bond when seeking injunctive relief. However, in Minnesota, this provision is superseded by the state's law, providing an additional layer of protection for the franchisee. This ensures that the franchisee's interests are considered and that the franchisor cannot seek an injunction without the potential safeguard of a bond determined by a court.