Selling a franchise: agree the ownership transfer rules before you buy

When buying a franchise, it is worth checking not only how you can run the outlet, but also whether you can sell it later. Within a franchise network, a new owner will usually need to meet the brand’s requirements. Buying the equipment or business alone does not give them the right to continue operating under the franchise. Clear rules for replacing a franchisee can therefore affect the value of your investment.

1. Distinguish selling the outlet from transferring the agreement

Poland has no separate, comprehensive legislation governing franchising. A franchise agreement is an innominate contract — one not specifically defined by statute — based primarily on the Polish Civil Code, including the principle of freedom of contract under Article 353¹. However, that freedom does not allow parties to disregard mandatory legal provisions, the nature of the legal relationship or principles of social coexistence.

When ownership changes, the rules on assignment of claims, assumption of debt and the sale of a business are relevant. Transferring rights is not the same as transferring obligations. The assignment of claims may be subject to contractual restrictions, while the assumption of debt requires the relevant consents. A general statement that “the franchisee may assign the agreement” therefore does not settle the whole process.

Before buying in, ask which mechanism the brand provides for:

• the buyer taking over the existing agreement with the consent of the required parties;
• termination of your agreement and the signing of a new one with the buyer;
• a sale of shares in the company that remains a party to the agreement.

The last option does not, in itself, transfer the agreement to another entity. However, the contract may also require consent to a change in shareholders or control of the company. A lawyer should review each of these situations separately.

2. Replace discretionary consent with a clear procedure

The franchisor may have a legitimate interest in checking a candidate’s experience, funding and readiness to run the business. Your risk, however, lies in a clause that allows the franchisor to delay a decision indefinitely or refuse consent without giving a reason. A prospective buyer may walk away before negotiations even reach the price discussion.

Ask for the criteria for approving a future buyer to be set out in the agreement. These might include financial standing, completion of training, the necessary qualifications or licences, or a willingness to run the outlet personally. They should be specific enough for candidates to assess their chances before incurring costs.

Also agree on:

• an exhaustive list of the information required to assess an application;
• a deadline for confirming whether the application is complete;
• a deadline for making a decision once all the information has been received;
• a requirement to give reasons for refusal;
• a process for resubmitting a candidate’s application once any shortcomings have been addressed.

Do not assume that no response means consent. Any consequences of silence must be expressly agreed and legally reviewed. It is also worth establishing when a candidate may receive confidential information about the outlet and who will arrange their meeting with head office.

3. Check the terms on which the buyer will operate

Approval of the buyer is not enough if it is unclear what agreement they will be offered. A buyer may value an outlet differently depending on whether they can operate for the remaining term of the current contract or must sign a new agreement with different fees.

Before you join the network yourself, establish whether a future change of franchisee will involve:

• retaining the existing terms and remaining contract period;
• charging the initial franchise fee again;
• compulsory refurbishment or replacement of equipment;
• additional training and a candidate assessment fee;
• loss of individually negotiated rights.

Every additional cost borne by the buyer may reduce the price they offer you. Such costs are not necessarily unacceptable, but they should be predictable. Negotiate a fixed amount, a cap or an unambiguous method for calculating fees associated with a change of franchisee.

Also check whether the franchisor reserves priority to purchase, a right of pre-emption or another right to step into the transaction. These arrangements can have different legal effects. Ask a lawyer to assess the procedure, deadlines and the clause’s impact on negotiations with an external buyer.

4. Plan the final settlement and release from obligations

Selling the outlet does not necessarily end your liability to the network automatically. You need a clear agreement on which obligations remain yours, which the buyer takes over and what the franchisor consents to. Any security or guarantees provided by you or third parties require particular attention.

Before buying in, propose an outline procedure for a future handover of the outlet. It should specify a cut-off date for settling accounts, a method for calculating outstanding fees and a document confirming the extent to which the outgoing franchisee is released from their obligations. Simply removing system access or handing over the keys is no substitute for such an agreement.

The eventual sale agreement should be coordinated with the network’s consent and the buyer’s contractual documents taking effect. This helps reduce the risk of selling the assets while remaining bound by the franchise contract, or of the buyer paying for an outlet they cannot operate under the brand. A lawyer should prepare the detailed arrangements to suit the transaction structure.

Practical takeaway: before buying a franchise, establish four things: who can take your place, when the network will make its decision, how much the transfer will cost and which obligations will remain after the sale. A predictable procedure does not guarantee that you will find a buyer, but it removes a significant obstacle to a future transaction.