BUYING A FRANCHISE
RE-SALE

At Greyson Legal | Franchising we have acted for numerous clients that have entered into the franchising industry through purchasing a franchise business.

A franchise re-sale involves the purchase of an already operating franchise business as a going concern from an existing franchisee.

This can be contrasted with buying a "greenfield" site, which involves buying a new franchise territory direct from the Franchisor.

When you buy an existing franchise business from a franchisee by way of re-sale, you will be dealing with at least two parties - the outgoing franchisee (Seller) and the Franchisor. If the franchise business operates from a leased premises, there will also be a third party, the landlord, who will need to give their consent as far as the outgoing tenant and incoming tenant are concerned.

What We Do

At Greyson Legal we offer advice at every step of the franchising business conveyance process and assist you with all of the key aspects, including:

help you to determine the type of entity structure you may wish to use to purchase and operate the Franchised Business, such as:- sole trader, partnership, company; or through a trust
make sure you understand the application of the Franchising Code of Conduct;
review and advise you on:
- Franchise Agreement;
- Disclosure Document; and
- related legal documents
assist you to satisfy the Franchisor's requirements for consent to the Franchised Business purchase, including reviewing and advising you on the conditions set out in the Franchisor's Deed of Consent to Assignment;
undertake all requisite searches;
review and advise you on the terms and conditions of the Contract of Business Sale;
review and advise you in regards to any associated lease, occupancy licence or lease assignment documentation;
identification of the tangible and intangible assets to be bought or sold;
assist with any statutory Business licenses;
deal with employee transfers;
ensure the release of security interests held by 3rd parties over the Seller's plant and equipment;
undertake all steps required to settle the transaction;
carry out all work incidental to the transfer of the Franchised Business.

Due Diligence

Buying a franchise business by way of re-sale can present an exciting opportunity to purchase an existing business already set up and operating under a known brand.

For further details, refer to our Franchisee Due Diligence Checklist.

Go to Checklist here

Advantages of buying a Franchise Re-Sale

Buying an existing franchise business by way of re-sale has the advantage that:

the initial set-up has already been done;
there is a trading history;
there is an existing customer base and goodwill;
staff familiar with the business may already be in place;
the supply chain is already in place;
you can see what is already there and assess what needs updating;
access to finance may be easier as financiers can base their decision not only on the Franchise system and your suitability, but also on past business trading history.

Disadvantages of buying a Franchise Re-Sale

There are certain disadvantages to consider when buying a Franchise Re-Sale, such as:

the purchase price for a franchise business re-sale maybe higher (than a new greenfield franchise) as you will also be paying for goodwill;
there could be underlying problems with the existing franchise business;
being an existing business, the plant & equipment maybe outdated or in need of repair and require modernisation or replacement;
past customers may have had a bad experience with the seller, thereby impacting negatively on the goodwill.

Learn More