Change of ownership of a franchise outlet: transfer procedures

When building a franchise network around an established business, it is worth planning for changes in outlet ownership from the outset. A franchisee may want to sell the business, pass it on to family members or bring in an investor. A well-designed procedure helps maintain continuity of customer service without automatically giving a new person access to the brand and know-how. The aim is not to end the relationship, but to ensure a safe transfer of an operating outlet.

1. Establish exactly what is changing hands

The expression ‘selling a franchise’ is imprecise. Before drawing up rules for future franchisees, distinguish between three situations that may require different approaches:

• Sale of equipment and stock: the buyer acquires specified assets, but the transaction itself does not grant the right to use the brand.
• Sale of the business: the transaction covers an organised business undertaking. This does not, however, mean that all contracts and obligations automatically pass to the buyer.
• Sale of shares in the franchisee company: the same company remains party to the agreement, although its owner or controlling entity changes.

Treat a conversion to a different legal form separately, as statutory rules on the continuity of rights and obligations may apply. It should not be equated with a straightforward asset sale.

In practical terms, prepare a notification form for proposed changes. It should include a description of the transaction, details of the prospective operator, the proposed date and a list of contracts needed to keep the outlet running. This ensures that head office does not assess the transfer solely on the basis that ‘a buyer has been found’.

2. Choose the right legal mechanism

Poland has no standalone statute comprehensively regulating franchising. A franchise agreement is an ‘unnamed contract’ — a contract type not specifically defined by statute — entered into within the limits of freedom of contract set out in Article 353¹ of the Polish Civil Code. Competition law, industrial property law and the Act on Combating Unfair Competition also apply, among other legislation.

The Civil Code is central to a change of operator. An assignment of claims is not the same as an assumption of debt. The former concerns rights; the latter concerns obligations and requires the relevant consents. Simply saying ‘we will assign the franchise’ is therefore not enough to transfer the entire contractual position effectively. You need to establish which rights and obligations will be transferred and what formal requirements the documents must meet.

Work with a lawyer to choose the solution for the particular transaction: a three-party agreement, or termination of the existing agreement coupled with the signing of a new one. In the second case, take particular care to avoid any gap between agreements in the right to trade under the brand.

A share sale, by contrast, does not change the party to the agreement. If you want a say in changes of control over a franchisee company, the contract must include appropriate notification obligations and consent procedures. Do not assume that head office automatically has the right to approve such a transaction simply because the business operates as a franchise.

There is also no general statutory requirement to register an outlet transfer in a dedicated franchise register. Obligations relating to Poland’s Central Register and Information on Economic Activity (CEIDG), National Court Register (KRS) or licensing authorities arise from the rules applicable to the business owner and the type of activity.

3. Set the conditions for head office approval

Approval of a transfer should be based on criteria known in advance, rather than a discretionary decision made just before the transaction. Within a franchise network, predictability protects both the brand and the franchisee who has invested in developing the outlet.

The agreement should specify what information head office receives, when the period for assessing a complete application begins and how the decision will be communicated. It should also explain how missing information is to be supplied. Do not promise unconditional approval or present silence from head office as consent unless that mechanism has been expressly agreed.

Transfer conditions may include:

• demonstrating that funding is available for both the purchase and the outlet’s ongoing operation;
• confirming the right to use the premises;
• preparing the new operator to fulfil their obligations;
• agreeing how the existing franchisee’s arrears will be settled;
• ensuring continuity of required insurance cover and authorisations.

Keep the assessment of the new operator separate from the settlement of accounts with the seller. Approval of the buyer alone should not be treated as releasing the existing franchisee from their debts. Similarly, the price paid for the outlet does not settle amounts owed to head office. Each of these matters needs to be clearly documented.

4. Prepare a handover record for the transfer date

Transaction documents are no substitute for an operational plan. Appoint responsible contacts at head office and on the seller’s and buyer’s sides. Agree when systems, financial arrangements and rights to use the brand will switch over.

The handover record should set out stock and equipment levels and condition, outstanding orders, customer deposits, ongoing complaints and obligations relating to vouchers or loyalty schemes. Agreements between businesses must not restrict customers’ statutory rights. Assign a responsible person and a deadline to every outstanding task.

Also plan changes to access permissions for email, the sales system, ordering portals and local online profiles. Do not hand over shared passwords; create appropriate accounts and revoke permissions that are no longer needed. Sharing customer and employee data requires a separate assessment of compliance with the General Data Protection Regulation (GDPR). If the transaction involves a transfer of an undertaking for employment-law purposes, check the obligations under the Polish Labour Code.

Practical takeaway: before signing the first franchise agreement, prepare a change notification form, approval criteria and a handover record template. Tailor the legal mechanism to the transaction — an asset sale, a share sale and a conversion of legal form are not the same thing.