Selling a franchise is a slightly different process than the sale of an ordinary business. Normally, there is an established procedure for the sale of any branch of the franchise.

You would find this process detailed within your franchise agreement under the ‘assignment’ clause, as well as in the operations manual. Despite the restrictions that might be imposed under the set procedure, it can simplify the whole process by identifying the things you must do in order for a sale of business to be a success.

If you’re considering selling your branch of the franchise, it’s definitely worth speaking with a franchise solicitor. It’s also a good idea to discuss the decision with your franchisor and neighbouring franchisees, as they may be able to advise you on how to go about it, or even show some interest in purchasing your franchise. Alternatively, they may know someone who is interested in purchasing the business, so it always worthwhile making the necessary enquiries so that you have options.

What does the Franchising Code of Conduct say about selling your franchise?

According to the Code, the franchisor must give a disclosure document to the purchaser of your franchise. Transparency is very important in any business transaction, so it’s a good idea to personally give a copy of the disclosure document to any prospective purchaser.

What are the standard obligations set out in a franchise agreement?

Every franchise agreement is unique. As such, the obligations on the franchisee when selling the business may vary depending on how the franchise solicitor drafted the agreement. Ask the franchisor if there are any additional prerequisites to selling the business. These requirements might include, but are not limited to, the following:

  • A ‘first right of refusal’ that gives the franchisor the right to buy the business back from you before any other potential purchaser;
  • An assignment fee;
  • The right to meet and greet the potential buyer (usually an interview);
  • The franchisor might have to give their approval before allowing the franchisee to sell;
  • The costs involved in training up the new franchisee must be worn by the old franchisee;
  • All accounts must be paid in full before any sale can go ahead;
  • A restrain of trade clause that prevents the old franchisee from using any of the franchisor’s intellectual property, and stops them from competing in any way that is contrary to the restraint clause;
  • The old franchisee must give any business registration documents to the franchisor or the new franchisee;
  • Any operations manuals or other documentation must be returned to the franchisor prior to the sale.

In addition to this, the franchisee will have to give back any client lists, mobile numbers, email addresses or other materials that relate to the operation of the franchise.

Conclusion

If you’re thinking that maybe it’s time to move on and sell your franchise business, consult your franchisor and your franchise solicitor to get the ball rolling. If you don’t have a franchise consultant or solicitor to help you with this, call LegalVision on 130 544 755 and speak with one of our experience franchise solicitors. We’ll provide you with a fixed-fee quote for advice on the sale of your franchise business.

Lachlan McKnight

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