Key Takeaways
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A franchise resale needs the franchisor's written consent, and the Franchising Code of Conduct limits how that consent can be refused.
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You are selling the right to operate under the agreement for its remaining term, together with the site, fit-out, equipment and local goodwill. The brand and its systems stay with the franchisor.
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Transfer fees, buyer training and a new or assigned agreement are often part of the deal, so settle who pays for what before you market the business.
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Involve the franchisor early so buyer approval runs alongside marketing, not after it.
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Have a solicitor with franchising experience review the agreement and your Code obligations before you list.
Selling a franchise follows the same broad path as any business sale: prepare the records, set a price, find a buyer, sign a contract and settle. The difference is that the franchisor sits in the middle of the process and has a say in who takes over.
The steps below cover reading the agreement, seeking consent, preparing the records and sequencing the settlement. Each one shapes how a franchise resale is priced, marketed and approved.
A broker for selling a franchise business can run the franchisor’s approval steps alongside marketing and buyer screening, so a buyer who meets the franchisor’s criteria is identified early.
What You Are Selling
A franchisee does not own the brand. What you hold is a contractual right to operate a particular business under that brand, at a particular location, for the period left on your agreement. That right, and the assets around it, divide into two groups:
What Transfers to the Buyer
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The franchise agreement, either assigned to the buyer or replaced by a new agreement for the remaining term.
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The premises lease, with landlord consent.
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Fit-out, plant and equipment, and stock.
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Local goodwill, meaning the trading history, customer base and staff attached to that site.
What Returns to the Franchisor
Operations manuals, system intellectual property and brand assets are licensed to you, not owned by you, and the phone numbers, domain names and customer databases may be too. Your agreement will set out what must be handed back and what the buyer receives afresh from the franchisor. List these items clearly in the sale documents so the buyer knows what comes from you and what comes from the franchisor.
Buyers comparing franchise and independent businesses will weigh that limited ownership against the support and systems that come with it. Show the unit's own performance, since that is the part you control.
Read the Agreement First
Before you speak to anyone about selling, read the transfer clause and the clauses around it. Look for:
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The process for requesting consent and the information the franchisor can ask for.
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Any first right of refusal that lets the franchisor buy the business before an outside buyer.
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Assignment or transfer fees and who the agreement says must pay them.
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Training the buyer must complete, and whether you or the buyer bear the cost.
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The remaining term, renewal options and any refurbishment due before or after transfer.
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Restraints that apply to you after the sale.
Have a solicitor confirm how each clause operates. The agreement governs the sale, so the price, timing and contract conditions all need to fit around it.
Franchisor Consent Under the Code
The Franchising Code of Conduct sets the ground rules for a transfer. You request consent in writing, and the franchisor may attach conditions, such as paying an assignment fee or fixing defects at the premises. The franchisor must not unreasonably withhold consent.
Reasons a franchisor may withhold consent include a buyer who does not meet its selection criteria, an unremedied breach of your agreement, or money you owe the franchisor. Under the ACCC's guidance on franchise transfers, consent can be taken as given if the franchisor does not refuse in writing within 42 days of your request, or of receiving the last further information it asked for.
Being up to date on royalties, compliant with the system and current on refurbishments removes common grounds for refusal.
Transfer Fees and Training
Franchise agreements may provide for a transfer or assignment fee and require the incoming franchisee to complete the standard training program. Agreements may place these costs on the seller or the buyer, or leave them to negotiation.
Decide early how to handle them. A buyer who discovers an unexpected training cost late in the process may seek to renegotiate the price, so set the position out in the heads of agreement and then in the contract.
Training also affects timing. Where the buyer must complete induction before taking over, the contract should allow for it.
Prepare the Resale
The franchisor will review the buyer, and the buyer and their lender will review you. Both reviews are easier when these records are ready:
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Financial statements, BAS lodgements and royalty reports that reconcile with each other.
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Franchisor audit or compliance reports, with any issues resolved.
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The lease, with its remaining term and options matched against the franchise term.
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An equipment and fit-out list, noting anything under finance or lease.
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Staff records, entitlements and current employment agreements.
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Supplier arrangements, including any the franchisor mandates.
A mismatch between the lease term and the franchise term can concern buyers and lenders. Where the two do not line up, consider raising an extension or new lease with the landlord before you list.
An appraisal of the unit on its own trading, not on the brand's reputation, gives you a defensible starting price. Adjustments to reported profit can increase or reduce the figure, so have them documented.
Find and Qualify Buyers
Franchise resales can attract several types of buyer: existing franchisees in the same system who want another site, operators from a related industry, and first-time owners browsing Gold Coast business listings. The franchisor may also hold a list of approved candidates.
Every buyer must satisfy the franchisor's selection criteria as well as your own. Qualify early on proof of funds or finance capacity, relevant experience and willingness to follow the system, because a buyer who fails the franchisor interview late in negotiations can cost you time and confidentiality.
Keep marketing discreet so staff, customers and suppliers hear about the sale from you, at the right time.
Sequence the Settlement
A franchise resale carries more conditions than an independent sale, and they need to run in order. The contract may be conditional on franchisor consent, landlord consent to the lease assignment, the buyer completing training, and the buyer receiving the franchisor's disclosure document with time to consider it.
A buyer taking over an existing franchise also has a cooling-off period under the Code. Your solicitor can confirm how that interacts with the contract dates.
Set the settlement date with those steps in mind and allow a buffer for the franchisor and landlord to respond. Do not assume either will respond at the earliest possible date.
Start With the Agreement
Read the transfer provisions in your agreement and list the consent steps, fees and training they require. Take that list to a solicitor with franchising experience before you approach the franchisor or a buyer.
Bond Business Brokers can build that consent process into the resale timetable.
Common Questions
Can the franchisor buy the business instead of my buyer?
Some agreements give the franchisor a first right of refusal, which lets it match an offer or buy on set terms before you sell to an outside party. Your solicitor can explain how the right is triggered, what notice you must give and what happens if the franchisor declines.
Can the franchisor withdraw its consent after giving it?
Under the Code, a franchisor that consents in writing may withdraw that consent within 14 days, but it must tell you in writing, give its reasons and not act unreasonably. Consent taken as given because the franchisor did not respond within 42 days cannot be withdrawn.
What if my franchise term is close to ending?
A short remaining term can make a buyer and their lender cautious, because the right they are buying may expire before they recover their outlay. Ask the franchisor about renewal or a new agreement for the buyer before you list, and get the position confirmed in writing.
This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.