Selling a Franchise

Selling a franchise is largely the same as selling a business, but there is the added aspect of your relationship with the franchisor.

If you are an existing franchisee who intends to sell your business, your Franchise Agreement may require the purchaser of the business to gain the prior approval of the franchisor. In most cases, the purchaser will be subject to the same selection criteria for the system as the original franchisee.

Franchising Code of Conduct

The Franchising Code of Conduct provides the following guidelines for selling your franchise:

• a request for a franchisor’s consent to a transfer of a franchise must be in writing
• a franchisor cannot unreasonably withhold consent to a transfer
• a time limit of 42 days applies for a franchisor to decide on a requested transfer of a franchise

Under the Franchising Code of Conduct, franchisees who sell their businesses as going concerns are required to provide a Disclosure Document to the purchaser, which, among other things, must include:

• contact details of the franchisor, franchisee, and background details of each director of the franchisee's business
• copy of the franchise agreement and lease agreements (if leases are to be transferred)
• profit and loss statements for the last two years
• summary of obligations the franchisee has with the franchisor
• pay details (including outstanding obligations) of each member of staff of the franchisee
• contact details of each ex-franchisee in the last 3 financial years

All franchisees intending to sell their business should ensure they receive accounting and legal advice from qualified and experienced franchising accountants and lawyers.