Franchise Agreement: Terms on a Franchise Resale

When you own a business, there will come a point in time when you need to sell it. If you own an independent establishment, you have the personal freedom to choose the process of selling it. While this can be challenging at a certain level, it can give you limitless possibilities. On the other hand, what if it is a franchise resale? One important difference of franchises from independent businesses is that the former are bound by a franchise agreement, which can limit franchise owners' actions and decisions. A franchise resale may or may not be possible, depending on the terms of a franchise agreement; but almost all franchisees can resell their business. They just need to know and follow a number of essential details.

Are Franchisees Allowed to Resell a Franchise?

The answer is yes. If it complies with the franchise agreement, franchisees are free to decide on a franchise resale. Take note though of "compliance". In selling an independent business, there are fewer conce
s involved compared to franchise resale. This is understandable because a franchise resale involves three separate parties: the franchisee, the franchisor, and the prospective buyer.

In a franchise resale transaction, the franchise agreement plays a very significant role. The document usually contains an extensive outline of what is covered in a franchise resale, and the requirements to make the transfer possible. This is why the first thing you need to do is study the franchise agreement thoroughly. Pay close attention to the clauses and terms that are related to assignment and transfer. Don't be surprised to if you come across a line that says you have no legal right to resell your franchise prior to consulting with the franchisor. The franchise agreement may also include clauses that are incorporated by the franchisor as protection from unproductive or irresponsible franchisees.

This should not scare you off though. In most cases, you will be asked to submit a request for franchise resale to the franchisor and provide extensive information on the prospective buyer, the draft sales agreement, etc. The franchisor will then evaluate your request and buyer proposal. The franchisor may also ask you to secure additional requirements.

In some cases, the franchisor may require the prospective buyer to go through the same application process for regular franchisees. The Right of First Refusal provision is also possible, wherein the parent company will step in to purchase the franchise. The main reason why franchisors implement such precautions is to keep your franchise successful and operational. You should expect the parent company to thoroughly review and scrutinize your franchise for resale proposal. The franchisor may also veto your resale if you priced too high. In such cases, the parent company is only conce
ed that the new owner may encounter problems in paying off his loans to buy the franchise.

Get the Most of Franchises Resale

When done properly in smooth cooperation with the franchisor, franchise resale can be a rewarding decision. Make sure that it is truly the best time for you to resell your franchise, and that no other option is more viable. Consider the monthly sales figures, the market situation, and the attractive features of your franchise business. You have to review all these factors again before you announce a franchise resale proposal.

Do not hesitate to seek help if you feel that you need it. Asking for the guidance of your franchisor is the easiest and the most reliable way to get assistance with your franchise resale. You see, almost all franchisors have access to a network of potential buyers that are maybe more qualified than the buyers you would find all by yourself.

Hiring a professional business broker is also an option if the franchisor cannot provide you with the necessary assistance you need in reselling your franchise. An experienced broker will be able to assist you in evaluating your franchise and finding an interested buyer for your business. Remember, though that business brokers' services are not for free. You need to pay the broker a certain percentage of the franchise resale price. Even with all the procedures, requirements, fees, and effort, reselling a franchise at the right reason and time is not a bad business decision at all, don't you agree?