Franchise Talk

I’m Selling A Franchise. Does The Buyer Have To Pay Fees To The Franchisor?

June 16th, 2009 | Author: Jack

By Jason Gehrke – SmartCompany.com.au:

Question: I am selling an existing business that is part of a franchise. I have just realised a few days ago that in addition to my asking price ($260,000) the franchisor expects the purchaser to pay an additional $45,000 to join the group and $8000 to train the person. This adds another $53,000 onto my asking price.

Is it ethical for the franchisor to charge such a high amount to join the group via purchasing an existing business, thus putting the cost of purchasing my store out of reach of many buyers? Your advice as to whether I am within my rights to question this with the franchisor would be so much appreciated. – Teresa

Answer: The issue of selling a franchise is usually the furthest thing from a franchisee’s mind when they join a group.

Consequently many don’t fully examine that part of the franchise agreement that deals with resales, or if they do, so much time has elapsed between buying the franchise and now preparing to sell that they are no longer mindful of some of the conditions of sale imposed by their agreement.

Your question doesn’t provide a breakdown of your asking price of $260,000, so it is unknown how much is goodwill, plant and equipment, fixtures, fittings and stock. Often in franchise resales, the goodwill component replaces the initial franchise fee paid to the franchisor when the franchisee originally joined, plus this is further boosted by the profit performance of the business.

Read full article.

Share and Enjoy: