Table of Contents
Circumstances may arise where your franchisee expresses a desire to sell their franchise. While this scenario can present obstacles, there are several steps you can take to ensure a smooth sale process and safeguard the interests of all parties involved. This article will explain what a franchisor, such as yourself, should do if a franchisee wants to sell their franchise location.
1. Use the Franchise Agreement
In the UK, there is no prescribed procedure franchisors must follow if their franchisee wants to sell their business. The franchise agreement you share with that franchisee will determine your next steps in this process.
Your franchise agreement should set out the franchise sale procedure. It should include detailed information about what will happen should your franchisee decide to sell. It is crucial to check the terms of this agreement and follow the steps within it.
The process can differ between franchises depending on the terms of the franchise agreement. For example, you may not allow your franchisee to sell their location to another individual or entity; they may only be able to sell it to you. Alternatively, you could allow franchise resales, but only with your prior approval and subject to meeting specific conditions.
To avoid legal disputes later on, you must understand and follow the terms of your franchise agreement.
2. Seek Legal Advice
The franchise sale process can be complex to navigate depending on the circumstances and the terms of your franchise agreement. It is a good idea to seek legal advice to help you through the sale process. A lawyer can help you to understand your roles and responsibilities as the franchisor.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
3. Ask For Written Notice
If a franchisee decides to sell their location, they should provide you with written notice of their intention to sell. Ensure that you keep records of your communication with the franchisee. Keeping detailed records can help you if a dispute arises further down the line.
4. Maintain Professionalism
Maintain open and professional communication with the franchisee. Transparency is a two-way street. By being open with them, you encourage them to reciprocate.
You can help your franchisee prepare for the sale, for example, by:
- helping them to arrange financial documentation;
- assisting them in their search to find a suitable candidate for resale; and
- taking further steps to enable a smooth transition.
To ensure a smooth transition, you will want to ensure that the franchisee follows the obligations in the agreement. You can ensure that they fulfil their duties while maintaining your professional relationship.
This handbook covers all the essential topics you need to know about franchising your business.
5. Consent to a Suitable New Franchisee
If your franchise agreement permits franchisees to sell their location to a prospective franchisee, they can only do so with your permission. Conduct comprehensive due diligence on the candidate, just as you would for a franchisee in a brand-new location. You will assess whether they are suitable for the role. You should consider factors such as:
- the potential buyer’s qualifications;
- financial stability;
- experience; and
- whether they align with your brand’s values.
At the same time, the potential new franchisee will also conduct due diligence to determine whether the franchise location would be a sound investment.
Assuming the candidate passes your evaluation, you will grant your consent, permitting your existing franchisee to sell their location to this person. You will then take on the responsibility of training the new franchisee. This includes ongoing support throughout their franchise agreement.
Key Takeaways
You must contribute to your franchise network’s long-term success and sustainability by navigating franchise sales with professionalism and strategic foresight. If a franchisee wants to sell their location, you should follow the process set out in the franchise agreement. Ensure you fully understand your franchise agreement to facilitate a smooth, hassle-free transition.
The terms of your franchise agreement determine factors such as whether your franchisee must sell the location to you and whether they must offer the location to you first before looking for potential new franchisees.
You should conduct due diligence on potential buyers, just as you would for new franchise locations. This ensures they are a suitable fit for the role. While you have the final approval, do not unreasonably withhold consent if the buyer meets the qualifications.
Seeking legal advice to guide you through this process can enable you to be fully informed throughout. Additionally, it will ensure you fulfil your obligations as the franchisor and help mitigate the risk of costly legal disputes.
If your franchisee wants to sell their franchise location, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
We appreciate your feedback – your submission has been successfully received.
