Franchise Advice


An alternative mechanism is for the franchisee to notify the company of their intention to sell their business. If the franchisor is not interested in buying, the franchisee is free to sell to a third party, subject to certain conditions. If the franchisor wants to buy, the franchisor and the franchisee get together to agree a price that is acceptable to both parties. If an agreement is reached (and, in most cases, it is), the deal is done and the business is sold. If they can’t agree on a price, the parties arrange for the business to be valued by an independent valuer. Once the value is determined the franchisor must either exercise its option to buy or


decline (within a time limit set out in the franchise agreement), in which case the franchisee is free to sell to a third party with the added advantage of having an independent valuation, thereby enabling the franchisee to market the business more eff ectively. From the franchisee’s point of view, the disadvantage with this mechanism is that the independent valuation may be lower than a fi gure the franchisee might have been able to obtain on the open market. The main advantage, however, is that the franchisee can eff ectively sell their business by making one phone call to the franchisor without


the hassle of having to deal with numerous prospective buyers. Furthermore, if the franchisor buys the business, the franchisee has the added advantage of not having to worry about whether or not the buyer will be approved by the franchisor, a condition that is found in most franchise agreements. It is generally accepted that it is easier and quicker to sell a franchised business than it is to sell one that is operated as an independent. This is one of the principal advantages of owning a business under a franchise.


About the author Manzoor Ishani is a senior consultant


solicitor with Sherrards (Solicitors), a commercial practice advising franchisors and franchisees in the UK and internationally


July/August 2017 | BusinessFranchise.com | 21


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