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Letter of Intent to Franchise a Business

Before one can engage in a franchising business it is essential to formulate a letter of intent which serves as the terms of agreement between the buyer and seller and therefore their formal agreement.

The LOI or letter of Intent is the formal agreement between a seller and a buyer which has the terms and conditions of the transaction inclusive of payments, diligence periods and sanctions, and other conditions that have been discussed upon between both parties.

This letter of content usually comes about in an agreement between the buyer and seller and a deposit of a particular sum of money.

The letter of intent gives the purchase the chance to review the set out terms and conditions of the seller before making any final decisions and signing a contract. At this stage of the transaction there is the possibility to change certain aspects of the terms and conditions and therefore agree upon something midway to formulate a formal contract afterwards. It is non-binding however indicative of the interest of the buyer in the sellers business purchase. The terms and conditions set by the seller direct due diligence from the buyer before the sale of the business.

To create a letter of intent it is very important to remember the specific details of how you want them to run your business. Since this particular letter of intent will focus on franchising a business stick to the business model which you want followed, from there formulate a set of guidelines that will direct the buyer into your idea of the scope of the business. With the letter of intent it is important to garner the entire scope of the business down to the specifics such as the consulting, liabilities, stocks, payments, inventory etc. These details should be as concise as possible and thoroughly reviewed not only by the seller but preferable by a professional legal counsel so as to ensure that everything has been taken well into regard and not left out. Terms of due diligence to run the business, should be clearly stated and inclusive of the prices that one has to pay before and during the entire financing process. Time frames should also state the effectivity of the contract and what grounds should be followed from then on.

It is important to state that the Letter of Intent is non-binding and as such include the necessary provisions which state distinctly the terms and agreements. Remember that the seller has right to ask for reasonable terms and alterations to the original plan and that this should be an agreement therefore a set of rules that both parties agree upon. There are however some parts of the agreement that should be set in stone and these factors will depend on the type of business that is being sold and how it is being run as well. Therefore the basis of the letters of intent varies from business to business yet still has to be reviewed upon thoroughly and result in a mutual agreement between both parties.

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5 Comments

  • GRACE N. FIEL said on February 27, 2013
    I WANT TO HAVE A SAMPLE LETTER OF INTENT TO FRANCHISE A NEW BUSINESS.
  • shilpa said on March 12, 2013
    I want to a format for letter of intent to franchise a new business. I need some inputs for the same.
  • marife caraig said on January 24, 2015
    Caloocan city Manila
  • robert gonzalez said on September 6, 2015
    i want to have a sample of letter of intent to franchise (Mc Donalds)
  • sharina ragos said on January 22, 2016
    i want to have a sample of letter of intent to franchise a business.(Donut)

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