I Want to Sell My Existing Franchise Business

Selling an existing franchise business is difficult and emotional, and sellers are likely to agree to anything just to get out of the business; don’t skip the step of using an experienced business or franchise attorney to draft or revise your Asset Purchase Agreement to give you the most protections from the buyer, the Franchisor, or the Landlord coming back against you for misstatements, or problems with the business.

Utilizing an experienced business attorney is important; Utilizing an experienced franchise attorney is critical. Why? Because there are numerous conditions the Franchisor and Landlord are going to require in order to approve your ability to transfer the franchise location.

First, before you find a buyer, determine what your Franchisor is going to require, if anything in upgrades as a condition to approving a transfer. You can and should work with the Franchisor ahead of time to negotiate a minimal requirement in this regard or a minimal cost figure, and that the Franchisor will agree to having the buyer take on this obligation. You can also try to negotiate a waiver or reduction of the transfer fee at this point. You’ll want to do the same thing with your Landlord. Then your Asset Purchase Agreement can provide for these obligation to be assumed by the buyer.

An experienced franchise attorney, such as myself, will make sure you that you have a tight agreement to keep a buyer from backing out for every little thing. Some of the more important items your Asset Purchase Agreement should contain are (i) a non-refundable deposit, in consideration for your not entertaining any other offers during the due diligence period; (ii) a short of due diligence period as possible; (iii) that all contingencies are waived after a certain timeframe if not raised in writing by buyer; and (iv) contain additional non-refundable deposits after a certain timeframe, as well as in the event the sale does not close on the closing date.

In addition, you will want to have your Seller warranties and representations non-existent if possible, or limited in scope as much as possible; and you’ll want to be sure to disclose all obligations, liabilities, and potential liabilities or threats or possible threats….better to have all potential problems disclosed in the Asset Purchase Agreement so there is no issue the buyer can come back to you for fraud or breach of contract if the potential problem arises as a real problem.

It is also critical, all information, particularly financial information you may give to the buyer, must contain a disclaimer that it has not been audited, and may not reflect current obligations required by the Franchisor under a new franchise agreement, and perhaps other disclaimers about liabilities.

Finally you’ll want to make sure that you are totally released from all obligations under the franchise agreement and the lease, including all personal guarantees, upon the close of the sale.

These are only a few critical items. There are many more. As an experienced franchise attorney, my goal is to protect the seller in all areas as much as possible against the 3 parties involved in selling an existing franchised business (the Buyer; the Franchisor, and the Landlord).