Selling a Franchised Business – Important Things You Must Know

If you want to sell your franchised business, there are a number of things that you need to take into close consideration. Bear in mind that there’s no one-size-fits-all answer to your questions related to selling a franchised business. In fact, the real answers can be found in the franchise agreement and any amendments state with respect to the obligations and rights that are related to a potential transfer of ownership. In other words, you’ll have to depend on the franchise agreement in order to sell the franchise. Here are some of the most important things that you’ll find when selling your franchised business.

Right of Approval
Franchisors have a key role n buying and selling of a franchised store or business. This is because most franchisors have the right to approve a qualified successor franchisee with respect to business, financial, and other relevant qualifications required to run a business like this. This right of approval gives maximum power to franchisor. The franchisor can use this right in order to terminate the franchise agreement in the event of an unauthorized transfer of ownership. In other cases, franchisor may approve the successor franchisee based on additional conditions, such as upgrade and open an additional location and others.

First Right of Refusal
In many (if not most) cases, franchise agreements gives franchisor first right of refusal to purchase your franchise upon those terms and conditions you have negotiated with a potential franchisee. In simpler words, if you have found a buyer or business broker uk, and you have decided to sell your franchised business, you still can’t sell it to them without the approval of franchisor. This simply makes things difficult for current franchisees because this clause means that few purchasers will be interested in pursuing your business.

Franchisor Will Get the Transfer Fee
According to most franchise agreements, approved successor franchisee is required to pay a transfer fee to the franchisor. In most cases, this is a small amount of money and it is generally substantially less than the fee paid by the original owner.

Standardized Methods of Operation
Most franchised businesses require franchisees to follow standardized methods of operation. Due to this many franchisors require the new inexperienced owner to take franchisor-sponsored training before they are permitted to acquire the ownership of the franchise.

Franchise Agreement Terms & Conditions
It is important to note that franchise agreements are in place forever. Some of them have options for renewal, while others have expiration dates. That’s why you should first negotiate the terms & conditions of the agreement with the franchisor before selling the franchise to the new approved operator.
In conclusion, these are some basic things that you’ll have to take care of when considering selling your franchised store or business. It is in your best interest to get the franchisor involved in this process right from the time when you decided to sell. This is because franchisor will be the person who will be approving or disapproving many of your decisions.

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