Selling your Franchise (for franchisors)

As a franchisor, should I have a resales policy?

Your franchise agreement should contain provisions dealing with resales. However, it is always worth having a resales policy which sets out, from a practical perspective, how a franchisee goes about selling their franchise.

Is the franchisor’s consent required in relation to a resale?

Pursuant to the terms of the franchise agreement, the consent is the franchisor is usually required. It is usually subject to certain conditions, including (i) the franchisee not being in breach of the terms of the franchise agreement or operations manual (ii) the approval of the buyer by the franchisor (iii) the payment of all sums owing by the outgoing franchisee to the franchisor (iv) the payment of any fees due to the franchisor in relation to the sale and (v) the incoming franchisee signing a new franchise agreement and paying any required fee.

Is the franchisor expected to help the franchisee sell their business?

Some franchisors assist the franchisee is selling their business and charge a fee (often a percentage of the sale price) for doing so. However, there is not generally any obligation on the franchisor to assist with the sale and it is usually down to the franchisee to make their own arrangements to market the business for sale. Until the sale completes, the franchisee remains liable to perform its obligations to the franchisor under the franchise agreement.

As a franchisor, should I be involved in the sale?

Many franchisors have little or no involvement in the sale of a franchisee’s business. Generally speaking their only concern is the payment of any monies or fees owing and also the signing by the incoming franchisee of a new franchise agreement.

However, some franchisors carefully control the resale process and in fact provide documentation for use by the franchisee and their buyer, any changes to which must be approved by the franchisor. However, this is more the exception rather than the norm.

Are the outgoing and incoming franchisees liable for the franchisor’s costs associated with the resale, including legal fees?

If the franchise agreement allows for it then the franchisor may charge the outgoing and incoming franchisees for their costs (including legal fees) of dealing with the sale.

It may be worth reviewing your franchise agreement to check whether such a provision is included.

If you need any advice on selling your franchise, please contact a member of our team in confidence here or on 02920 829 100 for a free initial call to see how they can help.

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