Transferring a Franchise to a New Owner: Set the Rules Before Expanding

When preparing an existing business to expand through franchising, your first thoughts are likely to be about opening a new outlet and supporting a new partner. Yet the very first agreement should also answer this question: what happens if the franchisee wants to sell the business? A well-managed transfer supports business continuity while preventing the brand from passing into the hands of someone without the necessary knowledge, funds or clearly defined obligations.

1. Distinguish a business sale from an agreement transfer

The term ‘selling a franchise’ can refer to different transactions. Before drafting contractual rules, work with a legal adviser to distinguish at least three situations:

• Sale of an ownership interest: the owner sells a stake in the company that holds the franchise. The contracting party generally remains the same company, but its ownership changes.
• Sale of an outlet’s assets: the buyer takes over assets such as equipment and stock. This does not automatically give them the right to use the brand or become a franchisee.
• Transfer of the franchise agreement: a new partner takes over the existing franchisee’s contractual position. Consent, obligations and the effective date of the transfer must all be addressed.

If you want a say when the company’s controlling owner changes, make explicit provision for this. A clause dealing only with the transfer of the agreement is not a reliable substitute for change-of-ownership provisions.

Prepare a brief overview of what is being transferred, who remains liable for debts, who needs fresh authorisation to use the brand and which related agreements need to be checked. Premises leases, supply agreements and software licences may have their own transfer conditions.

2. Place contractual freedom within Slovenia’s legal framework

Slovenia has no specific franchising act, mandatory franchise register or dedicated statutory franchise disclosure document. This does not mean that franchise transfers are free of legal rules.

The Obligations Code (OZ) governs general contractual relationships, including the transfer of agreements. Transferring a bilateral agreement to a third party requires the other contracting party’s consent; a lawyer should check how that consent must be given and any formal requirements. The OZ also requires parties to act in good faith and deal fairly. The approval process should therefore not be framed as a vague right to delay matters arbitrarily.

The Companies Act (ZGD-1) is relevant to changes in company ownership and corporate procedures. Selling an ownership interest and transferring a franchise agreement are not the same legal act. Contractual arrangements must also comply with mandatory legislation, including competition rules under the Prevention of Restriction of Competition Act (ZPOmK-2) and, where applicable, EU law.

Franchise association codes of conduct can provide useful standards for relationships within the network, but they are neither legislation nor official authorisation for a transfer. Check whether a particular code is binding through membership or incorporation into the agreement.

3. Define the successor approval process in advance

The franchisee needs to know what is required for a valid transfer request. The franchisor, in turn, needs enough information to assess whether the successor can continue operating to the agreed standards.

The process should include:

1. Written notice of intent: the type of proposed transaction, the proposed buyer and the indicative transfer date.
2. A list of required supporting documents: information about the buyer, ownership, acquisition funding and the person who will manage the outlet.
3. Assessment criteria: sufficient funds, management skills, availability and willingness to undertake training.
4. A response deadline: specify when the period starts, how additional information will be requested and how the decision will be communicated.
5. Completion conditions: signing the documents, completing training and addressing outstanding obligations.

The criteria should reflect the actual requirements of the business. If the original partner must manage the outlet personally, explain whether the same is expected of the successor or whether a suitably trained manager is acceptable.

Define any fee for processing the transfer and providing training in advance: what it covers, who pays it and when it falls due. Do not present it as a statutory charge. Also make clear whether the successor will take over the existing agreement or sign a new one, and how this affects the term of the relationship.

4. Complete the transfer with a documented handover

Approving a buyer does not, in itself, ensure a successful transfer. Before the handover date, prepare a written record distinguishing the outgoing partner’s obligations from those of the successor. Specifically address unpaid fees, stock, customer complaints and orders or customer advance payments already accepted. The internal allocation of these obligations must not undermine customers’ statutory rights.

Arrange access to the operations manual, IT systems and support channels as well. The new partner must receive the necessary permissions and knowledge in good time, while the previous partner’s access should be withdrawn at the appropriate point. Transferring personal data requires a separate legal assessment; selling an outlet does not, by itself, provide unrestricted permission to hand over that data.

Do not assume that existing guarantees or other security arrangements automatically remain effective after the change. Check their scope and any necessary consents. Involve employees, the landlord and key suppliers in the preparations where the transfer affects their rights or working relationships.

Practical takeaway: before your first expansion, establish a transfer process with clear criteria, deadlines and a written handover record. The aim is not to prevent a sale, but to ensure that the franchise network still has a capable and accountable partner after ownership changes.