Selling or transferring a franchise requires following rules and procedures set by the franchisor and the franchise agreement. Learn how to do it in 5 steps.

Whatever you do, get an outside valuation from someone who understands franchising. Not your brother in law the oil and gas accountant. But someone who truly understands franchising. Note this is very difficult for most Franchisees to do themselves. You’re just too emotionally attached to the business. Good luck. Everyone exits their business eventually. Now is your time!

When selling any business, franchise or not, first make sure your books are in order. Financial statements should be up to date and clean (clearly indicate owner benefit line items) so that potential buyers can see the financial history and growth trajectory. If you have a brick and mortar business, review your lease language for assignment to a new owner and make note of any fees, notices and timelines required. Review your Franchise Agreement to understand transfer fees that you or the buyer may need to pay once the transaction is approved. All of this information can be packaged for transparency in an Intent to Sell/similar document, along with an unbiased third party report on fair market value of your business.

Last updated on Sep 19, 2024

How do you sell or transfer your franchise?

If you own a franchise, you may decide to sell or transfer it at some point for various reasons, such as retirement, relocation, or dissatisfaction. However, selling or transferring a franchise is not as simple as selling or transferring any other business. You have to follow certain rules and procedures set by the franchisor and the franchise agreement. Here are some steps to help you sell or transfer your franchise successfully.

1 Review your franchise agreement

Carefully reviewing and understanding your franchise agreement is the first step in selling or transferring your franchise. The agreement is a legal contract between you and the franchisor that outlines the terms and conditions of your relationship. It may include clauses such as the franchisor's approval process and criteria for a new franchisee, the fees and charges you have to pay, the training and support you must provide to the new franchisee, the restrictions on who you can transfer your franchise to, and any consequences or penalties for violating the agreement. If you have any questions or doubts about your franchise agreement, it's best to consult a lawyer or a franchise consultant.

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Dianne Davis
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Whatever you do, get an outside valuation from someone who understands franchising. Not your brother in law the oil and gas accountant. But someone who truly understands franchising. Note this is very difficult for most Franchisees to do themselves. You’re just too emotionally attached to the business. Good luck. Everyone exits their business eventually. Now is your time!

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Lauren Fernandez

I invest in people and grow their food and restaurant brands. CEO + Founder | Investor + Managing Principal | Board Chair + Board Director
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I'm a former attorney and multi-unit franchisee and had a successful exit - here's the playbook: 1. Get tax + estate planning in place 1 year prior. 2. Review your Franchise Agreements for notification provisions AND a franchisor right of first refusal (ROFR). 3. Clean up your books for at least 12 mos. running to reflect real expenses and revenues to the business. 4. Get a valuation from a professional, understand the market. 5. Depending on answer to #2, likely will need to shop the deal for market offers - retain an investment bank or broker. 6. Notice the franchisor appropriately in line with #2. Enjoy retirement!

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Jennifer Gutiérrez Morales

Abogada | Magíster en Propiedad Intelectual e Industrial | Relaciones Públicas
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El primer paso es tener tu marca registrada, ante la oficina o autoridad competente de tu país. Determinar todos los derechos de propiedad intelectual que licenciarás o transferirás con tu Marca Establecer las obligaciones de las partes, ojo es imprtante dejar claro, que en aspectos contractuales este contrato debe ser solemne, porque entran juego una cantidad de facultades y derechos que son importantes de proteger, como lo es el Know How

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Guy Coffey
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Checking the couple paragraphs that deal with the potential sale of your franchise in the franchise agreement is way simpler than most people assume. Find it. Read it. If you don’t understand it, call the franchisor. Great first step recommendation as you don’t want to work “blindly” through this process.

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2 Find a potential buyer or transferee

The next step is to find a potential buyer or transferee for your franchise. Your options may include selling or transferring the franchise to a family member, a friend, an employee, another existing franchisee, or an external buyer or transferee interested in joining the network. Depending on your franchise agreement, you may need the franchisor’s consent before advertising or negotiating with a potential buyer or transferee. In addition, you may have to use the franchisor’s preferred broker or agent to assist you in finding a suitable buyer or transferee.

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Brad Ledford

Senior Franchise Operations Manager
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1. Is someone in your organization able to purchase your franchise? 2. Would a neighboring franchise want to add by acquiring your franchise? 3. Would a franchisee from a different brand be interested? 4. List the franchise yourself? 5. Definitely review your contract, talk to your franchisor to see your options.

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Archana Sharma (Bagla)

Customer service | Client Relations I Franchise Consultant I Team Leader I Marketing Strategies | BD I Event Management I Lead Generations I Brand Management Leader I Investor (1:1 Consultation)
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First use your network, references to talk about selling of your franchise. Use industry associations, ads (digital & non- adigital), attend trade shows etc to generate potential buyers leads . Franchise consultants can be used for the same

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Guy Coffey
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While this is an essential step, as a best practice other steps should precede it. If you don’t have a package of documentation to represent the business as a whole, what is the buyer considering? Plus, ideally you want to attract multiple buyers so you definitely want a nicely organized package of documents for people to review and consider.

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3 Prepare the necessary documents and information

The third step in selling or transferring your franchise is to prepare the necessary documents and information. This includes a copy of your franchise agreement, lease agreement, financial statements, tax returns, operating manuals, policies, and procedures. Additionally, provide a list of assets, inventory, equipment, fixtures, employees, customers, suppliers, and contracts. Furthermore, you should include a disclosure document that contains relevant information about your franchise such as its history, performance, risks and liabilities. Lastly, a valuation of your franchise should be conducted to determine its fair market value and asking price. You can compare similar franchises or apply a multiple to your earnings or discount future cash flows for this purpose.

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Christina Chambers, CFE

Chief Franchise Officer at DOXA Talent | Franchisee Success Leader in Development, Sales & Operations | 2x Business Owner | Lifelong Learner, Data Geek & Book Nerd | Believer that Culture Eats Strategy for Breakfast
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When selling any business, franchise or not, first make sure your books are in order. Financial statements should be up to date and clean (clearly indicate owner benefit line items) so that potential buyers can see the financial history and growth trajectory. If you have a brick and mortar business, review your lease language for assignment to a new owner and make note of any fees, notices and timelines required. Review your Franchise Agreement to understand transfer fees that you or the buyer may need to pay once the transaction is approved. All of this information can be packaged for transparency in an Intent to Sell/similar document, along with an unbiased third party report on fair market value of your business.

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4 Negotiate the terms and conditions

The fourth step is to negotiate the terms and conditions of selling or transferring your franchise with the potential buyer or transferee. You may have to discuss and agree on issues such as the purchase price and payment method, the closing date and location, warranties and representations, contingencies and escrow arrangements, indemnities and liabilities, and post-sale or post-transfer obligations and support. Additionally, you should involve the franchisor in the negotiation process and obtain their approval for the sale or transfer. The franchisor can reject or accept the potential buyer or transferee based on qualifications, experience, and financial capacity. They may also have the right to match or better the offer or exercise a first right of refusal.

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5 Sign the contracts and finalize the deal

The final step in selling or transferring your franchise is signing the necessary contracts. These include a franchise transfer agreement to transfer your rights and obligations, a purchase and sale agreement to transfer ownership and possession of assets, a lease assignment or sublease agreement to transfer lease rights and obligations, as well as a release and indemnity agreement that releases you and the franchisor from any claims or liabilities. Additionally, you should pay any fees and charges to the franchisor, such as a transfer fee, training fee, or renewal fee. Furthermore, you should provide any keys, codes, passwords, or other access devices to the new franchisee. Lastly, you should provide any training and support as required by the franchise agreement or the franchise transfer agreement. It is important to remember that selling or transferring your franchise can be a complex process that requires careful planning and execution; thus, consulting with your franchisor, lawyer, and accountant is essential for achieving a successful transaction.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you sell or transfer your franchise?

1

2

3

4

5

6

1 Review your franchise agreement

2 Find a potential buyer or transferee

3 Prepare the necessary documents and information

4 Negotiate the terms and conditions

5 Sign the contracts and finalize the deal

6 Here’s what else to consider

Franchising

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How do you sell or transfer your franchise?

1

2

3

4

5

6

1 Review your franchise agreement

2 Find a potential buyer or transferee

3 Prepare the necessary documents and information

4 Negotiate the terms and conditions

5 Sign the contracts and finalize the deal

6 Here’s what else to consider

Franchising

Rate this article

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