In a previous post, we discussed the process of selling your franchise. Now, however, we will walk you through the basics of re-selling your franchise – a totally different ball game.After you have notified the franchisor that you’re considering re-selling your franchise, there are several aspects you need to take into account.
Finding a prospective buyer
One of the often overlooked factors of the re-sale process for franchisees is that they do not realize that the franchisor will help them find the right buyer.
There are several considerations to make when re-selling your franchise.
Here are several ways in which the franchisor may assist in this process:
Find prospective buyers for a fee.
Use a third party sourcing firm to locate prospective buyers.
Direct you to franchise resale firms within the network to identify potential buyers.
The truth of the matter is that any franchisor will want a suitable buyer for its franchise network. Often, the franchisor will have a specific set of guidelines and procedures that outline the steps a franchisee needs to take prior to engaging in the re-sale process.
What you need to do before negotiations
There are two documents that a prospective buyer will need to review prior to any negotiations: the non-disclosure agreement and the prospectus of sale.
The NDA protects the franchisee’s proprietary information, while the prospectus details all necessary financial information as well as the asking price for the buyer.
The prospectus information will provide an overview of the whole franchise as well as the franchisee’s business. It will also cover the financial and accounting history of the business to include sales, operating costs in addition to profit and loss. The franchisee will also need to describe the property, staff members and equipment used in the location.
What you need from the prospective buyer
In addition, the potential buyer will need to meet with representatives of the franchisor for approval of the sale. Not only will the purpose of this meeting be for approval, but typically, it will also be training for the buyer. This is especially important because if the prospective buyer does not meet qualifications through the training provided, the sale could potentially be rejected.
What you need to know during negotiations
As soon as a price has been agreed upon, the franchisee and the prospective buyer will need to confirm the sales offer.
Any legal transfer of the franchise ownership cannot be completed without proper documentation and approval from the franchisor.
This point in the sales process is where it is essential to work with an attorney who specializes in franchise re-sales. There will be fees, commissions and various other unforeseen expenses prior to the sale, so franchisees will need to settle these before completing the sale.
The franchisee is also required to notify all supplies and vendors in advance of the sale’s completion so that the prospective buyer can establish credit with the providers. This is vital to ensure there is no business interruption following the completion of the sale.
What you need to do following completion of the sale
When the funds are sent for the sales price, the franchisee effectively transfers ownership of the business to the buyer. Often, the franchisee will conduct onboarding to walk the buyer through the initial operations of the business.
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Read Before You Sign: IT Contract Pitfalls Every NJ Business Should Know
In today’s digital economy, New Jersey businesses of all sizes rely heavily on technology vendors, software providers, cloud platforms, and managed IT services. Whether your company is purchasing software, migrating data to the cloud, engaging a cybersecurity consultant, or entering into a long-term managed services agreement, a careful IT contract review can have significant operational, […]
Non-disclosure agreements (NDAs) remain a critical tool for protecting sensitive business information. However, New York NDA requirements have evolved, and businesses must ensure these agreements are carefully drafted to remain enforceable. In a competitive market like New York City, NDAs are commonly used to protect proprietary information, client relationships, and strategic plans. At the same […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
