Franchise Key:
The answer to this is ‘not necessarily’ and it is certainly important to ask this essential question. The reasons for this are:
If the franchisor has not made any provisions regarding this in the contract and if the contract is signed with a company, then the purchaser automatically obtains the franchise agreement at the same time.
However, a serious franchisor would not wish just anyone (a competitor, a poor candidate, etc.) to purchase one of the franchised outlets in his network. To prevent this, he generally inserts two important clauses regarding resale into the franchise agreement:
1. a clause giving him preferential rights regarding resale (at the same price, of course)
2. another clause, termed ‘Intuitu Personae’, which specifies that the contract is signed in the capacity of the person of the franchisee and is therefore not transferable. This requires the franchisee selling his business to ask the franchisor to approve the potential buyer.
These provisions are important as they protect the name and prevent franchise re-sales leading to a deterioration in the value of the franchise network. This protects both the franchisor AND the remaining franchisees.
