Have No Fear

Pass It On

What if you want to sell your franchise to another person? In most systems, you can sell your franchise with the franchisor's written permission.

The transfer or "assignment" section of the typical franchise agreement is the longest in the contract, filled with dense legalese. But don't nod off here! It's crucial that you pay close attention because your ability to sell your business and retrieve your sweat equity is critical to your decision about whether to purchase the franchise.

Many franchise agreements give the franchisor the right of first refusal. If you receive a formal offer to purchase your business, you must first offer the franchisor the opportunity to purchase your business on the same terms. This helps the franchisor maintain control over the buying and selling of its franchises. Unfortunately, it may hamper a franchisee's ability to attract a serious buyer. What buyer wants to spend time putting together a detailed purchase offer, only to have the franchisor buy it out from under them?

This part of the franchise agreement also addresses your right to transfer your interests to a corporation or other legal entity, such as a partnership or limited liability company, and the rights of your successors should you die. Your attorney can help you understand what to do if a major transfer opportunity comes along.

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This article was originally published in the December 1998 print edition of Entrepreneur with the headline: Have No Fear.

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