::this post ID is 2378::::in categories of ..Legal Corner..::

When your franchise agreement ends

Option 3: Family succession
As alluded to previously, one specific type of transfer of a franchised business may involve you selling the franchise to one of your family members. There are three possibilities in this scenario of which you should be aware:

  1. The transfer may very well be subject to the same conditions as the sale of the business to any third party would be.
  2. Your franchise agreement may permit transfers of the business between your family members, so long as the family member in question is approved by the franchisor. If the family member/purchaser is already a director, officer or shareholder of the corporation, this structure will likely have already been disclosed to the franchisor. In these cases, obtaining franchisor approval should be relatively straightforward.
  3. In the unfortunate event of your death or disability, your franchise agreement may provide mechanisms by which your interest in the franchise agreement can be transferred to a surviving family member.

Know your rights
Like all good things, the initial terms of franchise agreements must come to an end. Whether you choose to renew the agreement for another term, sell the business to a third party or transfer it to a family member, your decision is personal and should be made in the context of your long-term career objectives. Before signing your franchise agreement, be sure to review and discuss renewal and transfer terms with your prospective franchisor. This will help you ascertain what level of support and co-operation you can expect to receive when you arrive at these important crossroads in your franchise career.

Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP in Toronto and can be reached at cfinkelstein@dalelessmann.com or (416) 369-7883.

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