Franchise Talk

How To Successfully Deal With Your Franchisor

June 4th, 2009 | Author: Jack

To sell a franchise, you will have to get the cooperation and assistance of your franchisor.

Every franchisor has a set of rules, regulations and requirements when it comes to reselling one of their franchises. I have seen more than a few business owners get quite far along in the process of selling their franchise only to find out the franchisor has restrictions in place that prevent the sale from happening.

When you sell a franchise, you will want to be prepared for these issues – not surprised by them at the last minute.

Item 17 of the UFOC (Uniform Franchise Offering Circular) describes the rights of the franchisor or franchisee to transfer or assign the agreement to a third party, as well as the rights of the franchisor to purchase the business from the franchisee. Some important features in your agreement with the franchisor that may affect your sale are:

The Right Of First Refusal: Many franchisors reserve the right to buy your business by matching any legitimate offer you get from a buyer. Before you put your business on the market, talk to your franchisor to see if they have any interest in buying it. If they tell you they don’t, have them put it in writing. The most sophisticated buyers (your best prospects) will not go very far in the buying process without reassurance that the franchisor is not going to come in at the last second and take the business away from them.

The Right Of Approval: Your franchisor will probably have the right to approve your buyer. The buyer will have to meet the same financial requirements as any other new franchisee. Those requirements may have changed since you signed your agreement, so you should ask your franchisor what financial standards your buyer must meet.

Length Of The Agreement… continue reading.

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