We've had our franchise for about six years now and are trying to sell. We found a buyer who has solid financing, relevant management experience, and a clean background check. But the franchisor keeps coming back with new conditions, first they wanted a 10% higher liquid capital requirement, then they scheduled an extra interview with our buyer, now they're asking for a revised business plan and a three-year cash flow projection that wasn't in the FDD. The buyer is patient but I can tell they're getting frustrated. Has anyone dealt with approval conditions that seem to keep moving? How did you handle it?
Franchise
How to handle a franchisor that keeps raising the bar for buyer approval
Read your franchise agreement. Most have a specific section on transfer and approval timelines—ofoten 30 to 60 days. If they're blowing past that without written justification, you have leverage. Send a formal letter requesting a decision by a set date. That said, they can usually find a reason to reject if they really want to.
Are they perhaps interested in buying the unit back themselves? Some franchisors make it intentionally hard for outside buyers so they can step in at a lower price.
This is a known tactic. They may not actually want the transfer unless the buyer is a top-tier operator. It's not always bad faith though—they have brand standards to protect.
Have you looked at whether these new conditions are applied uniformly to other transfers in your system? If you can find another franchisee who transferred recently with less scrutiny, you might have a discrimination argument. Probably not not worth litigating, but it gives you talking points.
I sold a QSR franchise three years ago and went through something similar. What helped was getting everything in writing and cc'ing our attorney on the emails. Once they saw we were documenting every new demand, the process sped up considerably.
A three-year cash flow projection for a buyer is not unusual, honestly. Some franchisors require that regardless of what the FDD says. The extra interview and higher capital requirement are more questionable
How much time, and money have you already sunk into this deal? At some point you have to decide whether fighting the franchisor is worth it or whether you cut the buyer loose and try again. Sunk cost is a real trap in these situations.
Also worth asking: is the buyer fully aware of every condition you've been handed? Sometimes sellers try to shield buyers from the franchisor's demands to keep the deal alive, but that backfires when the buyer finds out later.
Document everything. Dates, times, who said what. If this ends up in mediation or court, you'll need a clear timeline. And don't sign anything new from the franchisor without your own lawyer reviewing it first.
Seconding the documentation advice. We also found that requesting a face-to-face meeting with the franchisor's transfer committee helped humanize the process. Emails can make people more rigid than they'd be in a conversation
What does your franchise agreement say about who pays the franchisor's legal and review costs for the transfer? If they're racking up billable hours with all these extra demands, you may be the one footing the bill unless the agreement caps it.
One more thing—if the buyer is financing with an SBA loan, delays can klil the deal because the loan commitment has an expiration date. Make sure your buyer's lender is informed about the approval timeline.
GravelTrucker makes a good point. We almost lost a deal because the SBA commitment expired while the franchisor was still reviewing. Had to get an extension at the last minute.
You can also try going over the transfer department's head. Not always effective, but a polietly worded letter to the franchise development VP or even the CEO's office sometimes gets things unstuck.
Any update on this? Curious whether the franchisor finally approved or if you had to walk away.