Selling a business in NSW involves a lot of paperwork, especially if that business happens to be a franchise! It’s very important to ensure the contract is formally documented in a Sale of Business Agreement, and the appropriate searches and due diligence is undertaken prior to contracts being engaged.

Legal considerations when selling a business

If you’re a franchisor and are thinking of selling your franchise business, here is a quick list of the issues that could arise, and which you should keep in mind in pre-contractual negotiations with prospective purchasers:

  1. Franchisors consent – most franchise agreements set out that a franchise business cannot be sold or transferred without the express consent of the franchisor, which franchisor’s consent will not be unreasonably withheld. In order to be able to sell your business, it is reasonable for the franchisor to require you to rectify any breaches and provide details of the proposed purchaser so appropriate due diligence may be undertaken, so telling your franchisor of your intention to sell should be one of the first things you do (they may have a prospective purchaser, too)
  2. Lessors consent – if you are leasing premises directly, the lease likely prescribes that the lease cannot be assigned or transferred without the lessors consent. Such consent is, usually, incorporated into a deed of assignment. Alternatively, the lessor may prefer for your lease to be terminated or a new one entered into. As you cannot finalise any sale without this issue first being sorted, opening up the line of communication with your lessor or their representative early in negotiations will help prevent any delays down the track.
  3. Intellectual Property issues – usually, the intellectual property of a franchisor is licensed to a franchisee by way of the franchise agreement, i.e. they’re entitled to use it, but don’t own it. Some franchisees, however, develop their own intellectual property by way of unique systems or business practices. It’s important you understand where you stand in relation to intellectual property issues before you present the business to prospective purchasers.
  4. Form of Agreement – NSW, like most states, has a prescribed from of sale of business agreements. But simply ticking the right boxes is not enough, you will likely need special conditions drafted, and appropriate attachments collated.

Conclusion

Prior to finalising the sales terms, it’s prudent to talk to a franchise lawyer who knows about selling and buying franchise businesses, so they can make sure all the T’s are crossed and I’s dotted prior to exchange. 

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Emma Jervis
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy