Selling a franchise

Selling a franchise isn't quite the same as selling an ordinary business. Your franchisor will have an established procedure for the sale of any business within the franchise.

This procedure is usually outlined in your franchise agreement under “assignment” and will be detailed in your operations manual. Although it will restrict what you can do, the procedure will also make the sale process easier by giving you a clear understanding of what you need to do to make a successful sale.

It's also a good idea to discuss the sale of your business with the franchisor and other franchisees as they could have useful advice or may even offer to help you sell your business. They might want to buy it themselves or they could know someone who wants to get into the franchise group.

Complying with the franchise code

Under the franchise code the franchisor is required to provide a disclosure document to the person who buys your business.  As a gesture of goodwill, and in order to be transparent in your business dealings, it's a good idea to provide the buyer with a copy.

The ACCC regulates the Franchising Code of Conduct which is a mandatory industry code that applies to the parties to a franchise agreement.

Franchise agreement obligations

The obligations for the sale within the franchise agreement will vary from one franchise to another. Talk to your franchisor to find out about any specific requirements which could include the following:

  • first right of refusal for the franchisor to purchase the franchise;
  • an assignment fee;
  • interview by the franchisor of the prospective purchaser;
  • approval of the prospective purchaser as a suitable franchisee by the franchisor;
  • payment for the training of the new purchaser by the existing franchisee;
  • payment of all outstanding accounts and fees to the franchisor and suppliers prior to assigning the franchise agreement;
  • trade restraints to ensure you cannot open up as a competitor, or continue to use any of the intellectual property or systems;
  • transfer of business registrations to the new owner or back to the franchisor;
  • return of operations manuals and associated documentation; and
  • surrender of:
    • all client lists and details;
    • the business phone and fax numbers including mobile phones;
    • email or web page addresses.

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