My Franchisor is refusing transfer - Financial Times

Published on 5 Jul 2010 under category: article

Question put forward by Jonathan Moules, Business Questions

As published in the Financial Times – 19 June 2010 p29

I am the franchisor of a chain of photocopier suppliers. But I have decided to transfer the franchise to an interested party and have therefore drafted a transfer proposal for my franchisor. I have looked over all aspects of the potential buyer and can conclude that the buyer is financially sound and has business experience. However, my franchisor is refusing to agree to the transfer - for reasons he will not disclose. What are my rights?

As with most franchising disputes, your first port of call should be the franchise agreement. Any well-drafted agreement will cover what happens in the event of the franchisee wanting to sell up. A key aspect of franchising as a concept is that a franchisee should be able to build up equity value in the business and, in the right circumstance, sell this on. However, franchisors will generally have the option to vet potential buyers and it is possible for them to reserve the right to veto any sale without the need to justify the decision (again this should be set out in the agreement).

That being said, it is unlikely to make commercial sense to force a franchisee that wants to leave to stay on when there is a perfectly good replacement available - and, whatever the terms of the agreement, you can often negotiate a sale if you can find the right way to present the deal to the franchisor. You should consult a specialist franchising solicitor who can advise you on the terms of your specific agreement and who should have experience of negotiating franchise sales.

By Robert Bedford, a expert franchising Solicitor at Cubism Law