Selling Your Franchised Business
Franchised businesses are quite tricky to sell. Its b'ecause you do not really own the business; you just own a license to operate it. Most of the times selling the franchise does not go as smoothly as selling your own business.
Most of the obstacles you will certainly encounter will come from the franchiser himself.
A franchised business is a business that you own under license from someone else: the franchise owner. It can be best described as a business that you operate under his permission, and whatever you decide to do with that business, you have to make sure you have permission of that owner.
That goes the same for selling the business as well. Since it is not your business, you cannot sell the business right away without informing the franchise owner of your decision. Of course, by law, he cannot withhold that permission from you. That is, provided that you have done everything according to your contract and that there are no anomalies involved with your prior ownership of the franchise.
Under the contract, the franchise owner has the right to check on the buyer of the franchise. It is, after all, his business and it is in his interests to make sure that the business is in capable hands. You, as the franchisee, would have to pay a certain fee to the franchiser in exchange for him doing a diligence check on the potential buyer. Of course, the franchiser also has the rights to receive a percentage of the sale as it is his franchise that you are selling off.
Another right that the franchiser has over the sale is to intervene directly in the sale. The franchiser may end up to be a competing party to the sale. This comes true when you are selling the business through public bidding. Don’t be surprised if, in the middle of the bidding, the franchiser steps in and decides to buy the franchise for the price that you and the winning bidder has agreed upon. Once again such an action is within his rights as a franchiser. However, this does not happen often, as franchisers will only get in between you and your buyer if he thinks you’re not selling the franchised business at a fair value.
It is also possible for the franchiser to decide at the last minute to directly compete with the highest bidder. It could be that he wants to get the franchise back under his control. You cannot do anything about that, as you are just selling the rights and not the business itself. It is the right of franchiser to purchase the business and this supersedes whatever agreement you have with the other party. It might also result to the voiding of the agreement you have had with the new buyer.
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