Service Overview
Focused legal support for franchise sale
Selling an operating franchised business is often called a franchise resale. The transaction involves the seller, the buyer, and the franchisor, with the commercial landlord also playing a role where premises are leased.
The sale may involve business assets or shares, together with the transfer of franchise rights and any required lease assignment or change-of-control consent. The franchise agreement and lease determine which approvals, fees, and conditions must be addressed before the sale can close.
The franchise sale process
The process varies with the transaction structure and the governing agreements. Common steps include:
- Negotiating the agreement of purchase and sale. The seller and buyer agree on the purchase price and other commercial terms. The agreement should address required franchisor approval and landlord consent, along with the conditions that must be satisfied before closing.
- Addressing any right of first refusal. A franchise agreement may give the franchisor the right to match an offer and purchase the business. Any applicable notice requirements, response periods, and waiver arrangements need to be addressed before a third-party sale proceeds.
- Obtaining franchisor consent. The franchisor may assess the buyer’s finances and experience. Transfer conditions may include a fee, a new franchise agreement, required training, and location upgrades. Responsibility for these costs should be clear between the buyer and seller.
- Obtaining landlord consent. Where required, the landlord’s written consent is obtained for the lease assignment or other changes arising from the sale.
- Completing the closing. Once required approvals and conditions are satisfied, the parties address registered liens and debt payouts, transfer the purchase funds, and complete the handover of the business.
How our office can help
Our office assists sellers with the legal work needed to coordinate the transaction and understand any obligations that may continue after closing. Depending on the file, our services may include:
- Franchise agreement review: Identifying transfer restrictions, rights of first refusal, relevant deadlines, and transfer fees before the sale terms are finalized.
- Purchase agreement drafting and negotiation: Documenting the purchase price, closing conditions, and responsibility for transfer fees, required renovations, and related costs.
- Consents and releases: Working with the franchisor’s and landlord’s legal representatives on approvals and assignments, and seeking express releases from continuing guarantees and liabilities where available.
- Closing management: Conducting corporate and security searches, coordinating applicable Personal Property Security Act (PPSA) lien discharges and business debt payouts, and arranging the transfer of sale proceeds.
A completed sale does not necessarily release a seller from every existing guarantee or obligation. We help clients identify these issues and address the necessary releases as part of the transaction.