Risk Score
Pending analysis
Investment Range
$62,800 - $212,000
Franchise Fee
$7,500
Total US Locations
516
Business Summary
The EXIT Franchise provides a business format for operating real estate sales offices. EXIT Realty Upper Midwest, as the subfranchisor, grants franchisees the right to own and operate a real estate office using the EXIT System, which includes brand name identification, trademarks, advertising, training programs, and a referral system. Franchisees offer real estate brokerage services to the general public, hire and recruit real estate sales representatives, and compete in the real estate brokerage business within a specific geographic territory.
Corporate History
EXIT Realty Corp. International, the franchisor, was incorporated in Ontario, Canada in October 1995 and registered to do business in the United States in October 1997. It has always focused on selling real estate subfranchise regions and franchises, never directly owning or operating real estate sales offices. Upper Midwest Realty, Inc., doing business as EXIT Realty Upper Midwest, serves as a subfranchisor. It began selling real estate franchises in August 2013, acquiring rights to Iowa, South Dakota, and Minnesota from EXIT Realty Corp. International, and rights to North Dakota from another entity. In 2016, it acquired rights for Wisconsin, and in 2018, its affiliate acquired rights for Illinois. In March 2021, Upper Midwest Realty, Inc. further expanded its territory by acquiring rights to Michigan from EXIT Realty Corp. International. The company operates as an independent contractor, selling EXIT franchises within its assigned regions.
Financial Overview
Investment Range
$62,800 - $212,000
Franchise Fee (Low)
$7,500
Franchise Fee (High)
$25,000
Royalty %
10%
Equipment Costs (Low)
$10,000
Equipment Costs (High)
$30,000
Working Capital
$45,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
EXIT Realty Upper Midwest has historically experienced net losses and negative working capital, resulting in an accumulated stockholders' deficit. For example, as of December 31, 2023, the unadjusted stockholders' deficit was $1,206,094. However, after adjusting for earnings before interest, taxes, depreciation, and amortization (EBITDA), the company showed an accumulated stockholders' equity of $23,949 in 2023, which is an improvement from previous years. The company's operations have been funded through stockholder contributions, financing from EXIT Realty Corp. International, and cash flows from operations. Management has taken steps to improve operating cash flows, including restructuring notes payable and negotiating increased territory management. The company is actively growing its franchisee base and expanding into new markets, incurring short-term expenditures for future benefits. Management believes that these actions, combined with the stockholders' intent and ability to provide financial assistance if needed, will allow EXIT Realty Upper Midwest to meet its funding requirements for at least one year.
Financing Details
EXIT Realty Upper Midwest does not offer any direct financing options to franchisees. The franchisor also does not guarantee any leases or other financial obligations that franchisees might enter into for their business.
Performance Metrics
Total US Locations
516
Franchised Units
516
Corporate Units
0
Avg Square Footage
1,313
Franchising Since
1997
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
4
Litigation Summary
EXIT Realty Corp. International, the franchisor, has four ongoing litigation cases. Two cases were filed in 2024. The first, Kevin McFall v. Canadian Real Estate Association et. al., filed in January 2024, is a proposed class action alleging a conspiracy among real estate brokers to fix prices for buyer brokerage services. EXIT Realty Corp. International denies the allegations. The second, Don Gibson, et al., v. National Association of Realtors, et al., filed in April 2024, is a consolidated class action alleging national real estate brokerages conspired to enforce anti-competitive restraints related to multiple listing services. EXIT Realty Corp. International will respond to these allegations. Another case, Bruce Evans v. Christy Dwyer, EXIT Realty Lake Country, and EXIT Realty Corp. International, was filed in 2022, alleging unpaid commissions from an EXIT franchisee; EXIT Realty Corp. International denies the allegations and is in the discovery stage. Finally, a case from December 2016, 71353 Newfoundland & Labrador Inc. and Baushape Design, Inc. v. EXIT Realty Corp. International, is ongoing in Canada. The plaintiff claims $2,500,000 for an alleged breach of contract and an additional $975,000 under a guarantee, while EXIT Realty Corp. International has counterclaimed for over $1,278,090.55. Although filed in 2016, the plaintiff has not actively pursued this case for over three years.
Bankruptcy History
Neither EXIT Realty Upper Midwest (the Subfranchisor) nor EXIT Realty Corp. International (the Franchisor) have any bankruptcy history to report.
Agreement Terms
Initial Term
5 years
Renewal Term
10 years
Renewal Conditions
To renew their franchise agreement, EXIT Realty Upper Midwest franchisees must meet several conditions. They must not be in breach of the Franchise Agreement and must have complied with all operating and performance standards. Franchisees need to provide written notice of their intent to renew at least six months before the current agreement expires. They must also ensure all monetary obligations owed to EXIT Realty Corp. International and EXIT Realty Upper Midwest are paid. A renewal fee is required, calculated as 10% of the then-current Initial Franchise Fee for a five-year renewal (not exceeding 25% of the original fee paid) or 15% for a ten-year renewal (not exceeding 37.5% of the original fee paid). Finally, franchisees must sign the then-current standard Franchise Agreement and attend training programs for renewing franchisees.
Training & Support Program
Franchisor Assistance
Before opening, EXIT Realty Upper Midwest and EXIT Realty Corp. International provide franchisees with a copy of prototypical office plans, access to EXIT Realty Corp. International's computer software (MEMO), and the Quick Start Training Manual. They also review and consent to the franchisee's selected office site. After opening, ongoing assistance includes providing Broker Training and Presentation Process manuals, periodic training for franchisees and their management, discussions on operating and marketing issues, and regular office inspections with written quality performance reviews. Upon request, EXIT Realty Upper Midwest consults on technical matters (for a fee plus expenses) and provides revised and updated versions of the MEMO software.
Initial Training Hours
40
Training Location
Mississauga, Ontario, Canada; Atlanta, Georgia; and/or online, or a location selected by EXIT Realty Upper Midwest.
Ongoing Support
After opening, EXIT Realty Upper Midwest and EXIT Realty Corp. International provide various ongoing support services. This includes continued training for franchisees and their management personnel through Training Manuals Vol. 2 and 3. They periodically discuss operating and marketing issues related to the franchise and inspect offices to ensure compliance with standards, providing written quality performance reviews. Technical consultation is available upon request, though franchisees must cover associated charges and expenses. Additionally, franchisees receive revised and updated versions of the proprietary MEMO computer software.
Franchise Requirements
Ideal Candidate Profile
EXIT Realty Upper Midwest seeks franchisees who possess a valid real estate broker's license in good standing for the state where the franchise will be located. Ideal candidates are expected to provide high-quality real estate services, actively hire and recruit real estate sales representatives, and be capable of competing effectively in the real estate brokerage business. If the franchisee is an entity, the designated real estate broker of record must devote full time and best efforts to the business. The business must also be directly supervised on-premises by a manager who has successfully completed EXIT Realty Corp. International's training programs and has no conflicting business relationships.
Industry Experience Required
Yes
Management Experience Required
Yes
Sales Experience Required
Yes
Technical Skills Required
No
Operational Details
Location Type
commercial
Owner Participation
Full-Time
Territory Type
Protected
Staff Count
19
Territory Size Requirements
EXIT Realty Upper Midwest defines territories by population density, although there is no specific minimum square mileage granted. Territories are generally categorized as rural (less than 5,000 population), low density (5,000-20,000 population), medium density (15,000-50,000 population), or high density (over 50,000 population). Each Protected Territory is described by recognizable demarcations like boundary streets, highways, cities, or counties, and a map is included as part of the Franchise Agreement. The specific minimum number of Sales Representatives required to be maintained in a Protected Territory is determined by EXIT Realty Upper Midwest after analyzing active Realtor population, market conditions, and competition within the area.
Staffing Notes
EXIT Realty Upper Midwest requires franchisees to maintain a minimum number of Sales Representatives, who are licensed real estate salespersons or brokers. These requirements escalate over the first three years of operation, varying by territory size: a rural density territory needs 3 Sales Representatives after the first year, increasing to 7 by the third year; a medium density territory requires 6, growing to 20; and a high-density territory starts at 10, reaching 30 by the third year and thereafter. Franchisees are responsible for hiring and recruiting these Sales Representatives. Additionally, the business must be directly supervised on-premises by a manager who has successfully completed EXIT Realty Corp. International's training programs and is free of conflicts of interest with competitors. This manager is also required to sign a confidentiality and non-compete agreement.