What Rights Do You Have to Sell Your Franchise?

If you have decided that you know longer have the desire or ability to carry out the terms of your Franchise Agreement, your ability to sell your franchise depends on the franchisor. Whether or not you can sell your franchise and under what terms and conditions are outlined in your Franchise Agreement. As Franchise Agreements generally are drafted to protect the best interests of the franchisor, they often contain buy-back and right of first refusal clauses.

These clauses mean that the franchisor can buy back your existing business from you before you can accept offers from other buyers or that they retain the right to first refuse to buy back your business before you may entertain outside offers. Franchisors want control over who enters the franchise system, which is one reason for the popularity of these clauses, and they want the option to buy your business at a low rate which they could turn around and sell to another franchisee for a profit.

To determine market value the franchisor will send an appraiser to valuate your franchise. Sometimes the franchisor will allow the franchisee to hire his or her own appraiser but not typically. Depending on your agreement you may have to pay for the valuation, which if the franchisor is slow to action may get costly, although most franchisors will quickly make their decision whether or not to buy back your business. In a franchisor buy back arrangement you may not get the best rate if the franchisor decides to exercise their buy-back rights.

In the case of first refusal rights, the franchisor matches the offer of an outside buyer. If the buyer's offer includes non-cash payment, such as real estate, the franchisor has the right to send an appraiser to valuate the worth of said property or non-cash assets.