Sale of a franchise

 

A franchise sale is generally more complex than the sale of a regular business. This is because the franchise agreement will cover the exit of the franchisee from the franchise, as well as the sale of the franchise to a new incoming franchisee. It is therefore important to seek legal advice when considering selling a franchise. You will need a solicitor to help with the transfers and administrative aspects to ensure that you extract yourself from the franchise without ongoing personal liability and walk away from the sale with the greatest return on your investment.

The franchise agreement may set out various restrictions on a franchise sale. There may be time restrictions specifying an initial period in which you cannot resell the franchise. Generally, the franchise agreement will give the franchisor considerable control over who the purchaser is. The buyer has to be approved by the franchisor, both in financial terms and in broader terms, whereby the potential buyer will be subject to the franchisor’s criteria. This means that there may be a conflict whereby you as franchisee select a buyer and offer which you wish to accept, only for it to be rejected by the franchisor. The franchisor will have their own interests in mind, and not only your interest to achieve a good sale price. If you are considering a franchise sale it is important to have a specialist franchising solicitor assist you with the sale to ensure that your rights under the franchise agreement are respected and that the franchisor does not act unreasonably to your detriment.

You will most likely be subject to restraint of trade, or ‘non-compete’ obligations under the franchise agreement. These terms, by their nature, will bind you after the sale of the business. You will thus need to consider whether any business or career interests that you intend to pursue after the sale of the business will conflict with these restrictions. You should seek the assistance of a specialist franchising solicitor before signing any confidentiality agreements or similar.

If you would like to obtain legal advice on a franchise sale, Contact Law can put you in touch with a local specialist franchising solicitor free of charge. So, if you have any questions or would like our help in finding a local franchising solicitor please call us on 0800 1777 162 or complete the web-form above.

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