How to close the deal lawfully and promptly

Rose Lawyers on 18 September 2017

Whether you are ready to retire or simply want to profit from your hard work, selling a franchise is an exciting step, but it may also be equally overwhelming. It’s important to do it the correct way to ensure your rights are protected as the seller and that you do not find yourself in breach of an agreement.

Just like a house purchase, selling a franchise is a complicated matter and involves many parties. At Rose Lawyers, we are here to simplify the process and make it easier for you where possible.

The paperwork you need to sell your franchise

If you are thinking of selling your franchise, you will need to provide the following documentation:

selling a franchise

Mandatory Documents

  • The Franchise Agreement. This paperwork will dictate how you sell the franchise and to whom you can sell to. Usually there will be a clause in the agreement whereby the Franchisor has to approve the purchaser before making the sale. There may also be a clause in the contract that states that the Franchisor gets the first right to purchase the franchise if you wish to sell it.
  • Contract of Sale: This paperwork sets out the terms and conditions of the sale.
  • Disclosure Document: This paperwork contains all information regarding profits and losses of the business.

Optional Documents

  • Depending on the franchise agreement, there may be manuals or advertising material that you will also need to provide. If you are renting a premises, there may be a transfer of the lease. A transfer of business registration may also be required.

Considerations when selling your franchise

Usually, there will be a franchise fee that the Franchisor will charge for the Assignment. The Franchisor will also likely need to interview the prospective purchaser and approve them. The Franchise Agreement will set out whether there is to be any training of the purchaser, and who pays for this training. You will need to make sure that you surrender all of the required items such as client lists and details, business phone and fax numbers, mobile phone numbers, emails or web page addresses, etc.

Another thing to consider is that there will usually be a clause in the Franchise Agreement that may restrain you from opening up as a competitor to the business for a set amount of time and within a certain distance. You’ll also need to pay all of your outstanding fees owed to the Franchisor before the sale. In addition to this cost, you will also need to pay for any business agent’s fees and advertising, legal fees, landlord costs, and capital gains on the eventual sale.

Finally, the Franchise Agreement may provide for a Right of First Refusal for the Franchisor. This means the Franchisee must offer the business to the Franchisor at an agreed price before selling it or offering it to be sold to another third party. In some agreements, selling to a third party may be prohibited.

How long does the process of the sale of a franchise take?

There are no hard and fast rules when it comes to the time length of the process. This is due to many factors, such as what is written in the contract, what both parties want, and how well they are organised during events.

Let Rose Lawyers assist with selling your franchise

If you intend to sell your franchise business, it is essential that you engage with qualified and experienced lawyers who can provide you with accounting and legal advice. Rose Lawyers have been helping Franchisees all over Melbourne sell their business. Our team is familiar with the documents and procedures required to successfully and lawfully sell a franchise.

If you would like to talk about selling your franchise, contact Rose Lawyers on 03 9878 5222 for a confidential, no-obligation quote and chat.