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The
If you are a prospective franchisee, you should reassure yourself by looking closely at those clauses in the franchise contract that deal with your right to sell your business and the conditions attached to such a right. So what conditions should you expect to see?
Firstly, you are not in breach of contract at the time of the proposed sale; secondly, your franchisor gives their consent and approves of your buyer; thirdly, your buyer passes your franchisor's training course; fourthly, your buyer signs a franchise contract thereby agreeing to abide by the terms of the franchise in the same way as the other members of the franchise network.
Depending on the nature of the franchise and the franchisor, there will also be other conditions, namely:
• Refurbishing of premises (where appropriate)
• Upgrading the franchised business
• Payment of the franchisor's costs and (sometimes but not invariably) some sort of fee by way of renewal
The condition that creates the most difficulty is where the franchisee must obtain the franchisor's consent. Franchisees need to be reminded that one of the prime objectives of a franchisor is to ensure that standards are maintained, and this means ensuring that all franchisees satisfy the franchisor's criteria with regards to ability, skill, financial strength, character, etc.
Just as franchisors are very careful in the selection of their initial
Many franchisees often feel uncomfortable with the franchisor retaining discretion as to who they can sell their business to. Franchisees usually content themselves with having to rely on the reputation of the franchisor by talking to existing franchisees and doing their homework to see whether or not in the past, the franchisor has exercised such powers as it has retained, reasonably.
It is not all
As always, a distinction has to be made between those franchisors who are ethical and those who are not.
You must also take proper advice on the franchise agreement - the same set of conditions can have remarkably different effects when operated by different franchisors.