Selling a franchise

BUSINESS INFORMATION

Your franchisor will have an established process for selling a business within the franchise which may restrict what you can do but also make the sale easier by providing clear steps to follow.

Selling a franchise is different to selling a ‘standard’ business.

When selling a franchise, the process differs significantly from selling an independent business. Your franchisor will have a predefined procedure for transferring ownership, which is typically outlined in your franchise agreement and operations manual. While this process may limit your flexibility, it simplifies the sale by offering a structured approach to follow.

Tip

Before proceeding with the sale, consult your accountant and lawyer to ensure you fully understand your responsibilities. Additionally, discussing the sale with your franchisor and fellow franchisees can be beneficial. They may offer valuable insights or even express interest in purchasing the business themselves.

Franchise agreement obligations

The specific obligations for selling a franchise vary depending on the franchisor. Be sure to confirm the requirements with them, as they may include:

The franchisor’s right of first refusal to purchase the business.
Approval of the potential buyer by the franchisor, which may involve an interview process.
Payment of an assignment fee.
Covering the cost of training the new owner.
Transferring business registrations to the new owner or back to the franchisor.
Returning operations manuals and other documentation to the franchisor.
Handing over client lists, domain names, email addresses, and business phone numbers.
Restrictions on competing with the franchise or using its intellectual property after the sale.

Visit the Australian Competition and Consumer Commission website for further details on ending a franchise agreement.

Complying with the Franchise Code of Conduct

Under the franchise code the franchisor must provide a disclosure document to the potential buyer. As a goodwill gesture, consider providing a copy of this document to the buyer yourself. This can help ensure transparency and facilitate a smoother transaction.