5 things you
need to know
about
Selling a Franchise
- Many franchisees build up their business and then look to sell to generate a capital gain. This can be a great strategy and can be beneficial from a tax perspective, compared to only generating an income from the business.
- One key issue that franchisees face when selling a franchise is getting the franchisor’s approval. The Franchise Agreement requires the franchisor to either sell the business back to them or sign off on the new franchisee.
- Once you find a franchisee who will pay the asking price and who ticks all of the franchisor’s boxes, you will need to engage a lawyer to prepare a sale of business agreement.
- The new franchisee will need to enter into the Franchise Agreement with the franchisor, as well as ancillary agreements like the restraint of trade agreement and sometimes a personal guarantee.
- If you are selling a franchise that is operated from a physical premises, you will need to ensure that the commercial lease is assigned to the new franchisee. This can involve negotiating with the landlord and assisting the purchaser with the necessary negotiations. Finally, keep in mind that the easier you make it for the purchaser to come on board as the new franchisee, the easier your exit will be.
