How to Protect Your Right to Sell When Buying a Franchise

When buying a franchise business, you should also consider the conditions under which you could sell it in future. Building a profitable business does not mean you can freely transfer the franchise agreement to a buyer. Reviewing the sale and transfer provisions before joining a franchise network can help you protect the value you have built, find a suitable buyer and plan your exit from the investment. The aim here is not to take over an existing business, but to ensure that the investment you make today can be sold in future.

1. Distinguish between selling the business and transferring the agreement

Türkiye has no standalone law specifically governing franchise agreements. Franchise relationships are governed primarily by the Turkish Code of Obligations No. 6098 and the Turkish Commercial Code No. 6102, as well as, where relevant, the Law on the Protection of Competition No. 4054 and the Industrial Property Law No. 6769. Nor is there a general registration requirement or mandatory standard pre-contractual disclosure document specifically for granting franchises. This does not remove general legal obligations.

The rules on transferring contracts under Article 205 of the Turkish Code of Obligations are important: transferring a party’s position under a contract requires the participation, prior consent or subsequent approval of the party remaining in the contract. Selling the business’s furniture, equipment and stock therefore does not automatically transfer the right to continue trading under the brand to the buyer.

Check separately how the draft agreement deals with each of the following:

• A transfer of the business’s assets or of the commercial enterprise itself.
• A transfer of the franchise agreement to another person or entity.
• A sale of shares in the franchisee company.
• A change in the company’s control or management.

In a share sale, the same company may remain party to the agreement. Even so, the agreement may make a change of control subject to approval. Do not leave it unclear which approvals are required for each transaction. Discuss with your lawyer any formalities, registration requirements and liability for debts that each type of transaction may entail.

2. Make transfer approval an objective process

It is understandable that a franchisor will want to assess a new operator’s financial standing, experience and ability to meet operating standards. However, a clause stating that a transfer is “entirely at the franchisor’s discretion” creates considerable uncertainty when you find a buyer for your business.

Ask for the approval criteria in writing before investing. These might specify the buyer’s required equity capital, business management experience, training attendance and involvement in running the business. Also ask whether the criteria can be changed during the application process. The assessment should not rest solely on a brand representative’s verbal opinion.

Propose a defined application process in the agreement: the application documents are submitted, any missing information is identified within a set period, and a reasoned response to the completed application is provided within an agreed timeframe. These are contractual safeguards to negotiate, not a general statutory timetable for franchises.

Do not assume that a failure to respond amounts to automatic approval. The consequences of silence should be addressed expressly. The sale agreement with the buyer should also clearly state what happens to the deposit, preparatory costs and each party’s obligations if the necessary approval is not obtained.

3. Find out which agreement the buyer will operate under

Permission to transfer is not enough on its own. Whether the buyer takes over the remaining term of the existing agreement or signs a new one directly affects the sale value.

For example, requiring the buyer to pay higher ongoing fees or a new entry fee, or to make substantial investment in the premises, may reduce the price they offer you. Discovering these conditions only after finding a buyer weakens your negotiating position.

Ask the franchisor to answer the following questions in writing:

• Can the buyer continue with the existing rights and obligations?
• If a new agreement is required, which contract terms and fee schedule will apply?
• Will the remaining contract term be preserved, or will a new term begin?
• Will the sale trigger requirements for training, refurbishment or system changes?

It may not be possible to fix every future commercial term today. Even so, you can define the scope of potential changes and when they must be disclosed. Ask for the agreement the buyer will sign to be shared before any binding commitment to sell is made. This helps prevent the business’s price from being reopened for negotiation because of obligations that emerge later.

4. Assess rights of first refusal and transfer costs

Some agreements give the franchisor the first opportunity to buy the business on the terms offered by a third party. If there is such a right of first refusal, examine not just its existence but how it can be exercised.

The agreement should specify which documents the notice must include, how long the franchisor has to exercise the right, and when you become free to sell to the third party if the franchisor does not proceed with the purchase. Compare not only the price but also instalments, security and payment terms. Indefinite waiting periods or assessment processes that can be restarted repeatedly may deter serious buyers.

Bring all transfer costs together in a single table. Charges may appear under different headings, such as approval fees, buyer training, assessment costs and fees for a new agreement. For each item, ask who must pay, how it is calculated, how tax applies and whether it is refundable if the sale falls through.

For open-ended wording such as “all costs incurred by the franchisor”, negotiate requirements for supporting documents, prior approval or a cap. When calculating your net proceeds from the sale, review taxes and other transaction costs separately with your accountant.

5. Bring your liabilities to an end after the sale

Handing over the keys does not mean that all your obligations have ended. Debts incurred before the transfer date, personal guarantees and continuing contracts need to be checked separately. A transfer of a commercial enterprise may also give rise to statutory liability for past debts; an agreement between the parties will not necessarily bind third parties.

The completion documents should record the transfer date, how accounts will be settled, outstanding payments and the status of guarantees and other security. They should clearly state which obligations the franchisor releases you from, and any steps requiring separate consent from banks or other creditors should be completed. Do not rely solely on the buyer’s declaration that they have “taken over all debts”.

Practical takeaway: Before signing, have the transfer approval process, the terms that will apply to the buyer, sale costs and post-sale liability reviewed together. Your ability to sell depends not only on the success of your business, but also on how clearly your agreement sets out an exit route.