Buying a franchise: check your right to transfer it

Before joining a franchise network, it is worth considering not only how you will open your business, but also whether you will be able to transfer it later. A change in family plans, retirement or a takeover offer could make this contractual provision crucial. Owning the equipment or shares in the company does not automatically mean you can transfer the agreement and the right to use the brand to someone else.

1. Clarify exactly what you can sell

“Selling the outlet” can describe several different transactions. It might mean selling equipment and stock, the business as a going concern, or shares in the company that operates as the franchisee. Each requires different checks, and none, on its own, guarantees that the buyer can continue trading under the same brand.

Ask your lawyer to establish how the agreement defines a transfer. Check whether this includes a sale of shares, a change of control or the introduction of a new partner. Even if the company itself remains unchanged, the agreement may require prior approval for such a change.

Also clarify whether the incoming franchisee will take over the existing agreement for its remaining term or have to sign a new one. The distinction affects the value of the business: a prospective buyer needs to know the term, fees and obligations they will be taking on.

Key question: are you selling a business that can remain in the network, or merely assets with no guaranteed continuity?

2. Check the approval process and the Greek legal framework

Greece has no dedicated law providing a comprehensive framework for franchising. There is no specific mandatory pre-contractual disclosure document or dedicated franchise register. The general provisions of the Greek Civil Code mainly apply, alongside other rules relevant to the particular agreement and transaction.

Articles 197 and 198 of the Civil Code concern good faith and liability during negotiations, while Article 288 concerns the performance of obligations in good faith. Article 281 prohibits the abuse of rights. These provisions do not, however, create an automatic right to transfer the contractual relationship to any buyer you choose.

For this reason, examine the franchisor’s consent procedure closely. Ask for clarity on:

• The suitability criteria for the incoming franchisee, such as financial capacity and required training.
• The supporting documents needed for a complete application.
• The deadline for a written response and how reasons for a refusal will be given.
• Whether the franchisor has a right of first refusal or a right to buy the business, and how it can exercise that right.

Do not treat silence as approval unless the applicable terms clearly provide for this. A statement that “transfer is permitted subject to consent” is not enough to assess how workable the process will be in practice.

3. Calculate how much of the sale price you will keep

The agreed sale price is not necessarily the amount the seller will retain. Before you buy the franchise, ask for a full breakdown of the potential charges involved in a future transfer.

Check whether there is a transfer fee, who pays it and how it is calculated. Ask whether the incoming franchisee will have to pay a new initial franchise fee or training costs, and whether approval is conditional on upgrading the premises. Even charges payable by the buyer can reduce the amount they offer you.

Ask your accountant to prepare an illustrative calculation of the net proceeds, covering the sale price, contractual charges, outstanding debts, professional fees and the tax liability arising from the structure of the transaction. There is no single tax treatment that applies to every sale of a business or shareholding.

Pay attention to the timing of payments too. If you must settle liabilities before the buyer is approved, you may need additional funds before completion of the sale is certain.

4. Plan for a clear completion process and release from liability

The transfer should leave no ambiguity about who is responsible from the handover date onwards. Approval of the incoming franchisee does not necessarily release you from existing debts, guarantees or other commitments.

Before signing the initial agreement, ask for a clear explanation of how your exit will be documented. When a transfer actually takes place, the documents recording consent, the assumption of obligations and any releases from liability will need to be reviewed. The lease, financing agreements and obligations towards employees must also be considered separately: not everything transfers simply because the franchisor has agreed.

Also ask for clear arrangements for outstanding orders, customer deposits and stock. This helps reduce disputes over who receives payments and who fulfils each obligation.

Practical takeaway: before buying, ask a lawyer and an accountant to review a hypothetical transfer scenario. You should be able to answer clearly: who gives approval, against which criteria, at what cost, and when does your own liability end?