Selling or transferring your franchise is not always as simple as finding a buyer and agreeing a price. Your franchise agreement may control whether you can transfer the business, who can buy it and what needs to happen before the transaction completes.
That means you need to understand the agreement before you make firm commitments. You may also need approval from the franchisor, deal with business premises, provide information to the buyer and make sure the sale documents work with the franchise arrangements.
If you are already thinking, “I just want to know what I need to do before I agree to anything,” that is the right place to start. Checking the documents early can help you understand which parts of the transaction depend on you, the buyer, the franchisor or another party.
This guide explains the main areas to check when selling or transferring your franchise, where delays can arise and what you should have ready before the transaction moves forward.
Can you sell or transfer your franchise?
Whether you can sell or transfer your franchise depends first on the agreement you signed when you entered the franchise.
A franchise agreement creates rights and responsibilities between the franchisor and franchisee. Those rights do not necessarily pass automatically to somebody else because you have agreed to sell your business. Your agreement may contain specific rules about sale, assignment, transfer or changes in ownership.
You therefore need to check the agreement before promising a buyer that they can simply take your place. The document may say that the franchisor has to consent, that certain conditions must be met or that the incoming buyer must enter into a new franchise agreement.
The agreement may also deal with what happens when you leave the network. This could include outstanding payments, confidentiality obligations or restrictions that continue after the transfer.
Onyx has a separate guide explaining the different legal responsibilities of a franchisor and franchisee. That is useful background if you need to understand which parts of the relationship sit with each party. See Franchisor vs Franchisee: Legal Responsibilities Explained.
The practical point is to start with the agreement rather than the buyer. Once you understand what the agreement allows, you can make decisions about the sale with a clearer picture of what has to happen next.
In This Article
What should you check in the franchise agreement?
The transfer provisions should be one of the first parts of the agreement you review. You need to know whether the franchisor has a right to approve the sale and what conditions apply before that approval can be given.
The agreement may set requirements around the proposed buyer. For example, the buyer may need to meet financial, training or experience requirements set by the franchise system. You should not assume that somebody who is commercially ready to buy the business will automatically be accepted as a franchisee.
You should also check whether there are any fees or payments connected with the transfer. The agreement may contain provisions about outstanding franchise fees, transfer charges or other sums that must be dealt with before completion.
Post-transfer restrictions also need attention. Your obligations may not necessarily end on the day the business changes hands. Confidentiality, non-compete provisions or restrictions on using franchise information may continue afterwards, depending on what your agreement says.
The main question is simple: what does the franchise agreement require from you before somebody else can take over? You need that answer before you agree detailed terms with the buyer.
Does the franchisor need to approve the buyer?
The franchisor may have an important role in the transaction because the buyer is not only acquiring a business. They may also be asking to join the franchise network and operate under its brand.
If your agreement requires consent, the buyer may need to complete the franchisor’s approval process before the sale can proceed. That can happen alongside the business sale, but it needs to be accounted for from the start.
The franchisor may want information about the buyer’s finances, experience or ability to operate the franchise. The buyer may also have to complete training or sign a new franchise agreement before taking over.
This can create several linked processes. You may be negotiating the sale while the buyer reviews your business and the franchisor assesses whether the buyer is suitable for the network.
That is why it can be risky to agree on a firm completion date before you understand the approval process. Find out which steps depend on the franchisor and which documents the buyer needs to provide.
Once those points are clear, you can build the sale around the actual requirements rather than guessing how quickly everything should happen.
What exactly are you selling?
Selling a franchise usually involves more than transferring rights under the franchise agreement.
The transaction may include stock, equipment, goodwill and other business assets. There may also be contracts, liabilities, employees and premises connected with the business. The buyer will want to understand which of those items are included and what obligations they are taking on.
This is where the transaction overlaps with the wider process of selling a business. The sale documents need to explain what the buyer is acquiring, what stays with you and what conditions must be satisfied before completion.
Onyx already covers the wider legal process in Selling Your Business: Legal Steps You Must Get Right. That guide covers areas such as preparing for sale, sale structure, employee matters, consents and completion.
For a franchise, you need to consider those business sale issues alongside the franchise agreement. The two parts of the transaction must work together.
If the sale agreement says the buyer is taking over something that the franchise agreement does not allow you to transfer, you have a problem. That is why both sets of documents need to be considered together.
What happens if the franchise operates from leased premises?
If your franchise operates from a shop, office, restaurant, salon, takeaway or other rented premises, the commercial lease can become another important part of the transaction.
The buyer may want to continue trading from the same location, but that does not mean your existing lease can automatically be handed over. The lease may require the landlord’s consent before it can be assigned to the buyer.
That creates another approval process alongside the franchisor’s consent. The buyer may need to satisfy the landlord as well as the franchisor before the full transaction can complete.
Onyx explains this in more detail in Commercial Lease Assignment: What Sellers Need Before Completion. The article covers landlord consent, licence to assign, buyer information and other issues that can affect the timing of a business sale.
If the lease is an important part of the business, deal with it early. Waiting until the sale is nearly ready to complete can create avoidable delays if the landlord has not yet been approached.
Where the lease itself needs separate advice, Onyx also has a Commercial Lease Lawyers service page covering lease transfers and business sales involving rented premises.
What happens to employees when you sell the franchise?
Employees should also be considered early because a franchise sale may involve a change of employer.
Depending on how the transaction is structured, TUPE rules may apply. Where TUPE applies, employees can transfer to the new employer with existing employment rights and continuity preserved.
The exact position depends on the facts of the transaction, so you should not assume the rules apply in the same way to every franchise sale.
The buyer may also ask for information about employees as part of their due diligence. That means employment records and obligations can become part of the transaction well before completion.
You need to know what information can be shared, what consultation obligations may apply and what responsibilities will move to the buyer.
Addressing this early gives both sides a clearer understanding of what happens to the workforce when ownership changes.
What can delay a franchise transfer?
One of the biggest causes of difficulty is agreeing the commercial deal before checking what the franchise agreement requires.
You might have a buyer who is ready to proceed, only to discover that franchisor consent has not been requested. The buyer may then need to complete additional checks, training or documentation before the sale can move forward.
Premises can create another delay. If the buyer needs the existing location but the landlord has not yet approved a lease assignment, the business sale may be ready while the property side is still unresolved.
Documents can cause similar problems. The buyer may ask for information about contracts, accounts, employees or franchise obligations that has not yet been gathered.
These issues do not automatically stop a sale. They become harder to manage when they appear late.
Before you set expectations with the buyer, work out what needs approval, what information needs to be provided and which documents must be completed. That gives everyone a more realistic route towards completion.
What should you prepare before moving forward?
Start by gathering the franchise agreement and any later amendments or correspondence that affects it. You should also collect information about the proposed buyer and any communication you have already had with the franchisor.
If the business operates from rented premises, locate the commercial lease and any documents connected with it. You may also need employment information, key contracts and documents showing what assets form part of the sale.
Then be clear about the stage you have reached. Have you only decided to sell, or have you already found a buyer? Have you discussed a price? Has the franchisor been told? Is there a date the parties are working towards?
Those details help determine what needs to happen next.
You do not need to wait until every part of the sale is agreed before getting the documents checked. In many cases, understanding the transfer requirements earlier gives you a better basis for negotiating with the buyer.
The aim is to know what you are committing to before the transaction becomes difficult to change.
Frequently asked questions about selling or transferring a franchise
Can I sell my franchise to anyone?
Not necessarily. Your franchise agreement may require the franchisor to approve the buyer or may set conditions the incoming franchisee has to meet.
Check the transfer provisions before agreeing that a particular buyer can take over. The commercial agreement between you and the buyer still needs to work within the franchise arrangements.
Do I need permission from the franchisor to sell?
That depends on your franchise agreement. Some agreements require consent before the franchise can be sold, assigned or transferred.
Look for provisions dealing with sale, assignment, transfer and changes of ownership. These should tell you what approvals or conditions apply.
Can the buyer take over my existing franchise agreement?
Do not assume the existing agreement will simply move into the buyer’s name.
The franchisor may require a different transfer process or a new franchise agreement with the incoming franchisee. Your documents need to be checked to understand what applies.
Can I transfer my commercial lease at the same time?
Possibly, but the lease is a separate legal arrangement.
If the lease requires landlord consent, that process needs to run alongside the franchise sale. The buyer may need both franchisor approval and landlord approval before they can take over the full business.
What documents will I need when selling a franchise?
The exact documents depend on the business and transaction. Your franchise agreement, amendments, commercial lease, employee information and key business contracts may all be relevant.
You may also need sale documentation setting out what the buyer is acquiring and what must happen before completion.
How much does it cost to sell or transfer a franchise?
There is no approved Onyx fee figure for this article, so a specific amount should not be stated.
The cost will depend on the documents involved and the scope of the transaction. You may need advice on the franchise agreement, business sale and any connected lease or employment issues.
When should I get legal advice?
It is sensible to check the documents before you make firm commitments to a buyer.
That allows you to understand whether consent is required, what conditions apply and which parts of the transaction need to be dealt with before completion.
Understand the transfer before you commit
Selling or transferring your franchise can involve several connected legal arrangements. Your franchise agreement may control whether the sale can proceed, while the business sale, premises and employee issues may each need separate attention.
Checking those areas early helps you understand what is being transferred, which approvals are needed and what should happen before completion. It also gives you a clearer basis for dealing with the buyer, franchisor and any landlord involved.
If you are considering selling or transferring your franchise, get the documents checked before you make firm commitments.
Speak to Onyx Solicitors about your franchise sale or transfer, the agreement you have and the stage you have reached.