A franchise resale is not like selling or buying an independent business. The franchisor sits at the centre of every deal — and their consent, the franchise agreement, and the transfer process will shape everything from price to completion timeline.
Quick Answer
To buy or sell a franchise in the UK, you must understand the franchise agreement in detail before doing anything else. The franchisor's consent is required in virtually every resale. Transfer fees are payable. The incoming buyer must usually meet the franchisor's selection criteria and complete training. Territory rights, renewal options, royalties, marketing fund contributions and supplier restrictions all affect value. None of this can be negotiated away — the franchise agreement governs the deal.
Contents
What makes buying or selling a franchise different?
When you buy or sell an independent business, most of the deal is between the buyer and the seller. When you buy or sell a franchise, a third party — the franchisor — is central to every significant decision.
The franchisor owns the brand, the system, the operating model, the supplier relationships and, in many cases, the core intellectual property that makes the business work. The franchisee has a licence to operate under that system, subject to the terms of a franchise agreement that typically runs for five to ten years and cannot be altered unilaterally by either buyer or seller.
This creates a transaction structure unlike any other small business deal. The seller cannot simply agree a price with a buyer and hand over the keys. The franchisor must approve the sale. The buyer must satisfy the franchisor's selection criteria. A transfer fee is usually payable to the franchisor. The incoming buyer must typically complete training before the resale is finalised. And if the franchisor withholds consent — for legitimate reasons — the deal cannot proceed.
Buyers must also understand that a franchise resale is not the same as becoming a new franchisee from scratch. The territory, customer base, equipment, staff, lease and trading history come with the business. So does any goodwill the outgoing franchisee has built. But so do any problems — operational, compliance, relationship or financial — that the outgoing franchisee has accumulated.
The British Franchise Association (BFA) provides a code of ethics that members are expected to follow. Not all franchisors are BFA members, but membership provides some assurance of franchisor standards.
Understanding the franchise agreement
The franchise agreement is the most important document in any franchise resale. Buyers must read it in full, ideally with a specialist franchise solicitor, before making an offer.
Key provisions to understand include:
Term and renewal.When does the current agreement expire? Is there an option to renew? On what terms? Some agreements renew on updated terms, which may be materially different from the original. If the agreement has only one or two years left to run, a buyer is effectively buying a short-term licence — and should price accordingly.
Territory.Is the territory exclusive? What are the geographical boundaries? Has the franchisor reserved any rights to operate in adjacent areas or through different channels (for example, online sales that overlap with the territory)? Territory disputes can significantly affect value.
Royalties and management service fees.What percentage of revenue or gross profit is paid to the franchisor? Are these fixed or tiered? Are they reviewed periodically? Royalty structures directly affect the profitability available to the franchisee and should be modelled carefully.
Marketing fund contributions.Many franchisors require franchisees to contribute a percentage of revenue to a central or regional marketing fund. This is separate from the royalty. Buyers should check how the fund is managed, what it is spent on, and whether the franchisee receives meaningful marketing support in return.
Transfer provisions.The agreement will set out what happens when the franchise is sold. Typically this includes the need for franchisor consent, a transfer fee, a requirement for the buyer to complete training, and sometimes a right of first refusal for the franchisor to purchase the business itself.
Supplier restrictions.Franchisees are usually required to purchase products, materials, equipment or services from approved suppliers, at agreed prices. A buyer should understand the costs of these restrictions and whether there is flexibility.
Performance obligations.Many agreements include minimum sales or activity targets. Failure to meet them can give the franchisor grounds to terminate. Buyers should check whether the outgoing franchisee has met targets consistently.
Termination and default provisions.What can the franchisor terminate the agreement for? What notice is required? What happens to the territory on termination? Are there post-term restrictions on the outgoing franchisee?
Intellectual property.The franchisor owns the brand. The franchisee pays for the right to use it. At resale, the buyer acquires that licence — not the IP itself. Buyers should confirm what happens if the franchisor updates the brand, system or manual during the new agreement term.
A franchise agreement is a lengthy, franchisor-favoured document. Buyers should not assume they can negotiate materially different terms for the resale. The principal question is whether the agreement as it stands — including its costs, obligations and restrictions — supports a business that is worth buying at the price being asked.
Franchisor consent and the resale process
Most franchise agreements require the franchisee to obtain the franchisor's written consent before completing any sale of the franchise. Attempting to sell without consent will usually be a breach of the agreement and may entitle the franchisor to terminate.
In practice, the resale process typically follows a sequence:
Seller notifies the franchisor.Most agreements require the franchisee to inform the franchisor of an intention to sell. Some agreements give the franchisor a right of first refusal — the right to purchase the business at the price offered by the third-party buyer. If the franchisor exercises this right, the third-party deal cannot proceed.
Buyer screening by the franchisor.The franchisor will assess whether the proposed buyer meets their selection criteria. This usually involves an application, an interview, financial checks and a review of the buyer's background and experience. The franchisor is not obliged to approve every buyer — they have a legitimate interest in ensuring that the brand is operated by capable franchisees.
Transfer fee.A transfer fee is payable to the franchisor, usually by the buyer or split between buyer and seller depending on how the deal is structured. Transfer fees vary significantly between franchise systems — from a few hundred pounds to tens of thousands. Buyers should confirm the exact amount early and factor it into their total acquisition cost.
Training.The incoming buyer will usually be required to complete the franchisor's standard training programme before the resale is finalised. Some franchisors require training to be completed before contracts are exchanged; others allow it to be completed in the period between exchange and completion. Training costs may be additional to the transfer fee.
New franchise agreement.In some resales, the buyer takes an assignment of the outgoing franchisee's remaining term. In others — particularly where the original agreement is near expiry — the buyer enters into a new franchise agreement directly with the franchisor. A new agreement may be on updated terms, including revised royalty rates or updated obligations. Buyers must check which scenario applies.
Completion.Once consent is given, training is completed, transfer fees are paid and contracts are signed, the resale can complete. Completion typically involves the transfer of business assets, stock, equipment and goodwill, along with the assignment of the lease (if the franchisee holds the lease rather than the franchisor) and the novation or assignment of relevant contracts.
Sellers should begin franchisor conversations early — ideally before putting the business to market. Delays in obtaining consent can extend the transaction timeline significantly.
How franchise businesses are valued
Franchise businesses are valued on the same broad basis as other SMEs — primarily a multiple of maintainable profit or adjusted EBITDA — but with franchise-specific adjustments.
Royalties and fees affect profitability.The royalty, marketing fund contribution and any other ongoing franchisor fees come directly out of revenue. Buyers must ensure these are correctly accounted for in the profit figures — some sellers present profit before royalties, which is misleading.
Remaining term affects value.A franchise with eight years remaining on the agreement, plus a renewal option, is worth more than one with eighteen months left and no renewal. Short residual terms create significant uncertainty for a buyer.
Franchisor relationship affects value.A franchise with a co-operative, supportive franchisor and a clean relationship history is worth more than one where the outgoing franchisee has a history of disputes, defaults or non-compliance.
Territory quality matters.A well-established territory with strong customer density, brand recognition and low competitor presence is more valuable than a newer or underperforming territory.
Owner dependency.As with all SMEs, value is reduced where the business is heavily dependent on the owner's personal relationships, skills or reputation. A buyer should assess whether customers, clients or accounts are loyal to the business or to the individual.
System quality.Franchise systems that provide genuine operational support, marketing, training, technology and buying power add real value to the franchisee's business. Buyers should assess what the franchisor actually delivers in exchange for royalties and fees.
Franchise resales are sometimes valued at a lower multiple than equivalent independent businesses because of the ongoing royalty burden, the lack of brand ownership and the restrictions imposed by the franchise agreement. However, established franchise systems with proven models, strong brands and good support can command strong multiples — particularly in high-demand sectors.
Financial information to prepare or check
Sellers should prepare — and buyers should request — the following financial evidence.
Accounts.At least three years of filed accounts showing revenue, gross profit, overheads and net profit. Ensure royalties, marketing fees and other franchisor payments are correctly included in the overheads — not presented as optional or one-off costs.
Management accounts.Year-to-date management accounts showing current trading. Where there is a significant gap between filed accounts and recent trading, buyers will want explanations and evidence.
Revenue by stream.If the franchise generates income from multiple sources — product sales, service contracts, maintenance, installation, licensing — break down revenue by type. Understanding what is recurring versus one-off is important for valuation.
Add-back schedule.A clear schedule of legitimate add-backs: costs that will not continue under new ownership, such as a seller's salary above market rate, personal vehicle costs charged through the business, or one-off professional fees.
Royalty and fee schedule.A clear summary of all amounts paid to the franchisor — royalties, marketing fund contributions, technology fees, training costs — over the period covered by the accounts.
Payroll.Staff costs, headcount, contracts, commission structures and any pension or benefit obligations.
Equipment and asset finance.A schedule of any finance agreements on equipment, vehicles or fit-out, including balances outstanding and monthly payments.
Working capital.Stock, debtors, creditors and any seasonal cash flow patterns. Buyers need to understand the working capital cycle and whether the purchase price includes or excludes stock and working capital.
VAT returns.To cross-check against declared revenue.
Franchisor correspondence.Any letters, notices, audit results or communications from the franchisor relating to performance, compliance or the proposed sale.
Sector-specific franchise checks
Every franchise operates within a specific sector, and that sector will have its own compliance requirements. A buyer acquiring a food franchise faces different checks from a buyer acquiring a care franchise, a gym franchise, a cleaning franchise or a property franchise. Below are the key franchise-specific checks that apply across all sectors, before sector-specific compliance is considered.
Franchise agreement.The full agreement must be read and understood — term, territory, royalties, marketing fund, supplier restrictions, performance obligations, transfer provisions and termination rights.
Franchisor consent.Confirm the process, timeline and conditions for obtaining consent to the resale. Confirm whether the franchisor has a right of first refusal and whether it is likely to be exercised.
Transfer fee.Confirm the exact transfer fee amount and who bears the cost. Factor this into the total cost of acquisition.
Territory and renewal rights.Confirm the territory boundaries, exclusivity, and whether a renewal option exists. If so, confirm the renewal terms and any conditions attached.
Royalties and marketing fees.Confirm the exact royalty rate and marketing fund contribution. Model the effect of these costs on the business's maintainable profitability.
Training requirements.Confirm what training the buyer must complete, when it must be completed, and at what cost. Confirm whether the franchisor offers adequate training for a buyer who is new to the sector.
Lease and premises.Confirm who holds the lease — the franchisee or the franchisor. If the franchisee holds the lease, confirm that the landlord's consent to assignment is obtainable. If the franchisor holds the lease, confirm the terms of any sub-licence and what happens to the premises if the franchise is terminated.
Supplier restrictions.Review the list of approved suppliers. Confirm pricing and whether the buyer will have access to the same supply terms. Assess whether supplier costs are reasonable for the territory.
BFA membership.Check whether the franchisor is a member of the British Franchise Association. While not compulsory, BFA membership indicates adherence to a published code of ethics.
Performance record.Check the outgoing franchisee's performance against any targets or benchmarks set by the franchisor. Poor performance relative to the network may affect consent or indicate underlying issues with the territory or business.
Network health.Where possible, speak to other franchisees in the network. Ask about franchisor support, training quality, marketing effectiveness, supply chain reliability and whether they would invest in the system again.
Staff, TUPE and handover
Most franchise businesses employ staff. In a business sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006 — known as TUPE — will normally apply to any employees who are engaged in the business being transferred.
Under TUPE, employees transfer to the buyer on their existing terms and conditions. The buyer inherits the employment contracts, employment history and any associated obligations. Buyers cannot change terms and conditions of employment as a condition of the purchase — any attempt to do so may be unlawful.
Before completion, sellers should prepare a full staff schedule showing names, roles, start dates, hours, salaries, notice periods and any outstanding HR matters. Buyers should review this information carefully and seek legal advice on any complications — including employees who are absent, on long-term sick leave, or who have raised grievances.
In franchise businesses, staff retention is often closely linked to the success of the handover. Customers and clients may have relationships with specific members of staff, not just with the business or brand. Key staff who leave after completion can damage trading materially.
A structured handover plan — agreed between buyer and seller, and ideally supported by the franchisor — should cover the introduction of the new owner to staff, customers and suppliers; the handover of operational knowledge and systems; training by the outgoing franchisee if appropriate; and a clear timeline for the transition period.
Confidentiality, data protection and staged disclosure
Franchise businesses hold significant amounts of sensitive information — customer data, staff records, supplier terms, client accounts, CRM data and financial records. Buyers who are new to the sector, or who turn out not to be suitable candidates, should not receive full access to this information at an early stage.
Use a staged disclosure process:
Initial disclosure.A summary of the business: sector, location, trading history, broad revenue profile, staff headcount and reason for sale. No customer lists, no staff names, no detailed financials.
NDA stage.Once a buyer has been screened and signed a non-disclosure agreement, share financial summaries — revenue, profit, key metrics — without identifying individual customers or staff.
Formal due diligence.Once a heads of terms is agreed and the franchisor's consent process is underway, share detailed financial records, lease documents, staff schedules, customer data (where necessary and lawful), supplier contracts and compliance records.
Customer data — including names, contact details and any sensitive information — must be handled in accordance with the UK GDPR and the Data Protection Act 2018. The ICO has published guidance on data sharing in mergers and acquisitions that sellers and buyers should review before sharing identifiable personal data.
Due diligence for franchise buyers
Franchise due diligence involves two parallel streams: standard business due diligence and franchise-specific due diligence.
Standard business due diligencecovers financial verification (accounts, management accounts, VAT returns, payroll), legal checks (lease, contracts, IP, litigation, debts), tax (VAT, PAYE, corporation tax, any outstanding liabilities), property (lease terms, rent, dilapidations), assets (equipment, vehicles, fit-out, finance agreements) and staff (employment contracts, TUPE analysis, HR matters).
Franchise-specific due diligencecovers the franchise agreement in full (with specialist legal advice), the transfer process and timeline, the transfer fee and training costs, the territory, the royalty and marketing fee model, performance history against franchisor targets, the franchisor's financial health, the network's reputation and the outgoing franchisee's relationship with the franchisor.
Buyers should also consider commissioning an independent financial review of the business, separate from the financial information provided by the seller. An accountant familiar with franchise businesses can identify anomalies, normalise earnings and advise on the reliability of projected returns.
Do not assume that because a business is part of a franchise network it is automatically well-run, compliant or profitable. The franchisor's brand is only as valuable as the franchisee's execution of the system.
Franchise buyer and seller checklist
Sellers
Read your franchise agreement in full, focusing on transfer provisions and right of first refusal
Notify the franchisor of your intention to sell at the appropriate stage
Confirm the transfer fee amount and who bears the cost
Prepare three years of accounts with royalties and franchisor fees correctly shown
Prepare a management accounts pack for the current year
Prepare an add-back schedule
Confirm the lease position — who holds it, remaining term, renewal options
Prepare a staff schedule with contracts, pay and notice periods
Prepare a summary of approved supplier agreements
Prepare a handover plan for transition of customer relationships and operational knowledge
Use staged disclosure and NDAs before sharing detailed information
Seek specialist franchise legal and tax advice
Buyers
Obtain and read the full franchise agreement before making an offer
Confirm the franchisor consent process, criteria and timeline
Confirm the transfer fee and training costs
Confirm the remaining term and any renewal options — and the terms of renewal
Model the royalty, marketing fund and other franchisor costs against maintainable profit
Review the territory — boundaries, exclusivity, population, competition
Check the outgoing franchisee's performance record against network targets
Speak to other franchisees in the network
Review the lease — who holds it, remaining term, dilapidations, landlord consent
Check all staff under TUPE
Review supplier restrictions and approved supplier pricing
Instruct a specialist franchise solicitor and accountant
Make the offer conditional on satisfactory due diligence and franchisor consent
FAQs
Does the franchisor have to approve the sale of a franchise?
In almost all cases, yes. The franchise agreement will require the franchisor's written consent before a resale can proceed. Attempting to sell without consent is typically a breach of the agreement. Buyers should confirm the franchisor's criteria and process before committing to a purchase.
What is a franchise transfer fee?
A transfer fee is a payment made to the franchisor when a franchise is sold to a new franchisee. It compensates the franchisor for administering the resale, assessing the buyer and providing training. Transfer fees vary significantly between franchise systems. Buyers should confirm the exact amount and whether it is borne by the buyer, the seller or split between them.
What happens if the franchise agreement is near expiry?
A short residual term significantly affects value and risk. Buyers should establish whether a renewal option exists, what the renewal terms are, and whether the franchisor has indicated willingness to renew. Buying a franchise with less than two years remaining and no confirmed renewal option is high-risk. Specialist advice is essential in this situation.
Can the buyer negotiate the franchise agreement?
Generally, no. The franchise agreement is a standard document used across the network. Franchisors rarely allow individual franchisees to negotiate material changes. A buyer's solicitor can clarify specific provisions and raise concerns with the franchisor, but should not expect to achieve significant amendments.
Is a franchise resale better or worse than buying a new franchise territory?
Neither is categorically better. A resale offers an established customer base, trained staff, proven equipment, trading history and sometimes lower upfront cost than the total investment required to set up a new territory from scratch. A new territory offers a full-term agreement, no legacy issues and the opportunity to build from the start. Buyers should assess both options within the specific franchise system they are considering.
Do I need a specialist franchise solicitor?
Yes. A general commercial solicitor may miss franchise-specific issues in the agreement. A solicitor experienced in franchise law will review the agreement, advise on transfer provisions, assess the territory, check renewal rights and identify risks that a non-specialist might overlook. The cost of specialist advice is modest relative to the risks of buying a franchise without it.
Does TUPE apply when buying a franchise resale?
TUPE will normally apply where the resale involves the transfer of a business as a going concern and the employees are assigned to that business. Employees transfer on their existing terms and conditions. Take specialist legal advice before completion.
Should sensitive information be shared early in the process?
No. Share business summaries first. Share financial details after a signed NDA and buyer screening. Share customer data, staff details and detailed operational records only in formal due diligence, with data protection advice in place.
Key takeaways
A franchise resale is not like buying an independent business — the franchisor's consent, the franchise agreement and the transfer process govern everything.
Read the full franchise agreement before making an offer, with a specialist franchise solicitor.
Confirm the transfer fee, training requirements, remaining term and renewal options early.
Model royalties, marketing fund contributions and all franchisor costs against maintainable profit — not revenue.
Understand the territory: boundaries, exclusivity, population, competition and performance history.
Speak to other franchisees in the network before committing.
Use staged disclosure and NDAs to protect sensitive information.
TUPE will normally apply to employees — take specialist advice.
Make any offer conditional on satisfactory due diligence and formal franchisor consent.
Related resources
Important disclaimer
Buy a Business Ltd is a marketplace, not a broker. Information, guides, checklists and examples on this site are for general guidance only and do not constitute legal, tax, financial, investment, valuation, brokerage or regulated advice.
Buying or selling a business involves risk. You should seek independent professional advice before buying, selling, valuing or financing a business.
Sources and useful references
British Franchise Association: Code of Ethics — bfa.org.uk
GOV.UK: TUPE — transfer of undertakings (protection of employment) — gov.uk/transfers-takeovers
Competition and Markets Authority: unfair contract terms guidance — gov.uk/cma
Companies House: Get information about a company — find-and-update.company-information.service.gov.uk
ICO: Data sharing due diligence in mergers and acquisitions — ico.org.uk
GOV.UK: Business transfers, takeovers and TUPE — gov.uk/transfers-takeovers