Transferring a Company-Owned Outlet to a Franchisee: Preparing the Handover

Building a franchise network for your business does not always mean opening a new outlet. You can also transfer an existing operation to an independent franchisee. The established business continues, but ownership, decision-making powers and financial responsibility change. Success requires the business transfer and the future franchise relationship to be prepared as separate but coordinated arrangements.

1. Define exactly what the franchisee is buying

Start by setting out what is being transferred. In an asset sale, the buyer acquires the agreed components of the business, whereas a share sale involves buying shares in the company. The structure affects liabilities, contracts and taxation, among other things. Choose the structure with a lawyer experienced in business acquisitions and a financial adviser before making any binding offers.

Prepare an inventory of assets and liabilities. Include, at a minimum, equipment, stock, outstanding orders, customer deposits, gift cards and any maintenance or service obligations. Also identify which assets the business owns and which are leased or subject to finance arrangements. Simply describing the sale as a transfer of a “going concern” leaves too much room for interpretation.

Keep ownership of the franchise concept separate from the outlet’s assets. When building a franchise network, the intention is usually to grant the franchisee a contractual right to use the name, branding and operating model, not to sell the entire concept. The sale agreement and franchise agreement must describe this consistently.

Turn this scope into a practical schedule identifying who will take over each asset or liability and when. Record any excluded items too. This allows the buyer to understand what the purchase price covers and what they need to obtain separately before continuing operations.

2. Present the outlet’s finances under the new division of responsibilities

The outlet’s current results do not, on their own, show what the business will look like for the franchisee. Within your company, marketing, administration and the founder’s work may, for example, have been covered by shared overheads. After the transfer, the franchisee will need either their own resources or an agreed service to cover these functions.

Compile outlet-specific financial information for review and explain how it has been prepared. If the accounts do not report the outlet separately, show how shared costs have been allocated. Distinguish actual figures from calculated adjustments and forecasts. Do not present profits that depend on the owner’s unpaid work as earnings a new franchisee can achieve on the same basis.

Prepare a current profit and loss statement alongside an outline of the post-transfer cost structure. In the latter, include franchise fees, services for which the franchisee will become responsible and any costs that will fall away. The aim is not to promise profitability but to make the changing division of responsibilities clear.

Keep the purchase price separate from the fees payable under the franchise relationship. Payment for equipment and the business is not the same as payment for the right to use the concept or for ongoing support. If there is an initial franchise fee, explain what it covers and ensure there is no unclear double charging for the same item or service.

Allow the buyer to have the information reviewed by their own accountant and lawyer. Record any discrepancies identified and their effect on the sale terms before signing, rather than waiting until the handover.

3. Align the sale and the franchise agreement

Finland has no dedicated franchise legislation, general franchise registration requirement or statutory franchise-specific pre-contractual disclosure document. This does not remove responsibility for the accuracy of the information provided. Relevant legislation includes the Finnish Contracts Act, the Unfair Business Practices Act and the Competition Act, as well as EU competition rules where applicable.

The Contracts Act covers matters such as the validity of contracts and the adjustment of unreasonable terms. The Unfair Business Practices Act prohibits, among other things, false or misleading statements relating to business activities that may affect demand or supply. Competition rules, meanwhile, restrict anti-competitive arrangements between businesses, including those within franchise networks.

The Finnish Franchising Association’s Code of Ethics is a form of self-regulation, not law. Its application and any contractual binding effect must be distinguished from statutory obligations. Do not claim membership of the association or commitment to its code without a valid basis.

Ensure that the conditions for the two agreements to take effect are compatible. The buyer should not end up having purchased the outlet without obtaining the right to use the concept. Equally, the franchise agreement must make clear what happens if the business sale does not go ahead.

Conditions to check include securing finance, obtaining any necessary consents from contractual counterparties, paying the purchase price and handing over control. Also define what happens in the event of a delay. A provision establishing which agreement takes precedence can help, but the priority should be to remove inconsistencies.

4. Plan the handover of responsibilities at the outlet

A business transfer may qualify as a transfer of an undertaking under Finland’s Employment Contracts Act. If it does, rights and obligations arising from existing employment relationships pass to the new employer in accordance with the law. This is not determined solely by the title of the sale agreement or by what the parties agree between themselves. Assess the implications for employees and any applicable information obligations before completing the transfer.

Check the transferability of each key contract individually. In an asset sale, a lease, IT systems agreement or supplier contract, for example, may not transfer without the other party’s consent. In a share sale, the contracting party generally remains the same, but change-of-control clauses may still affect continuity.

Prepare a written checklist for the handover date:

• take stock and record the condition of equipment;
• reconcile outstanding orders, customer deposits and obligations to customers;
• check that payment processing and invoicing use the correct business details;
• transfer the necessary access rights and revoke old ones;
• inform employees and customers of the change in the business responsible for operations;
• sign a handover record and agree deadlines for outstanding matters.

You must also establish a lawful basis under data protection rules for transferring customer data and provide appropriate privacy information. Do not copy all of the existing company’s data to the buyer just in case it is needed.

Practical reminder: prepare a single, coordinated handover plan covering the sale, the franchise agreement and the outlet’s day-to-day operations. Proceed with the transition only once a responsible party has been assigned to every key asset, obligation and usage right.