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Sale of An Operating Outlet

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You must follow the basic franchise sales steps if the franchisor is selling an operating outlet to a prospect.

If the operating outlet was previously franchisee-owned, you must provide a prospective purchaser with the following additional information, for the franchisor's last 5 fiscal years:

  • the name, city, state, and current business telephone number (if known) or last known home telephone number of each previous owner

  • the time period when each previous owner controlled the outlet

  • the reason for each previous ownership change (for example, termination, non-renewal, voluntary transfer, ceased operations, reacquired by the franchisor, etc.)

  • the time period(s) when the franchisor controlled the outlet.

The additional information may be attached to the franchisor's FDD as an addendum when the FDD is furnished to the prospect, or may be provided later to the prospect in a supplement to the previously furnished FDD.  The addendum or supplement must be given to the prospect at least 14 calendar days before the prospect signs any binding agreement with, or pays any amount to, the franchisor or any affiliate.
 
At your option, you may provide a prospective purchaser of the operating outlet with information about the actual operating results of that outlet.  The information is not required to be attached to the franchisor's FDD or to be put into any particular format. For example, it may include unaudited financial statements for the outlet.
 
You may not provide the prospective purchaser with information about the operating results of other operating outlets. Similarly, you may not provide information about the operating results of the outlet to prospective purchasers of other operating outlets or of franchises for new outlets.
 
If you would like to know if you can franchise your business, connect with me on LinkedIn and give me a call.

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1 Comment

Warren does a great job of clearly laying what franchise sellers need to take to do and not do when selling an existing unit.

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About this Entry

This page contains a single entry by Warren Lewis published on March 18, 2013 2:51 PM.

Why Band-Aid and Kleenex are No Longer Valuable Brands was the previous entry in this blog.

When Are Your Franchisees Disguised Employees? is the next entry in this blog.

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