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Franchises are an opportunity to run a business while having the framework, support and guidance of an umbrella company – the franchisor. Both the franchisee and franchisor enter into a Franchise Agreement and franchises remain well regulated by the Franchise Code of Conduct, which has been updated with enhanced transparency measures for 2025.
However, the franchise model doesn’t suit everyone. The success of your franchise relies heavily on both parties operating their side of the business in good faith, with mutual respect and cooperation – a challenge in today’s dynamic market. It’s always wise to review your obligations through resources such as our Franchisees’ Legal Obligations article before proceeding.
The franchisor, with the bigger picture in mind, may adopt decisions that benefit some franchisees over others. Financial rewards might not meet every franchisee’s expectations, and it can take many years before initial buy-in fees are recovered. Such disparities can lead to disenchantment with the overall arrangement.
Personal circumstances – whether due to bereavement, divorce, or simply a change in business priorities – can force a franchisee to sell. Sometimes, it just doesn’t work out and one of the parties elects to extricate themselves from the franchise.
One way to do that is to sell or transfer your franchise.
What Does The Law Say?
Fortunately, the law has provisions for these situations. The Franchise Code of Conduct outlines a clear process for transferring a franchise, designed to protect the interests of both parties while ensuring fairness and transparency.
The Franchise Code Of Conduct
Essentially, the process revolves around transparency by promoting full disclosure and sufficient notification. It involves formally requesting consent from the franchisor and ensuring that such consent cannot be withheld unreasonably. The Code also sets out definitive time frames to keep the process moving efficiently.
As the franchisee, you must make the request in writing to the franchisor for consent to transfer your franchise. You need to provide all the information that the franchisor would reasonably require to make an informed decision – and if further details are needed, you should supply them promptly. For more detailed guidance on drafting such communications, our business setup articles can be very useful.
The franchisor must give consent within 42 days of your request, or provide reasons for withholding it. Conditions might be imposed—such as requirements the proposed transferee must meet or concerns regarding financial stability—that justify a delay or refusal.
The key is that consent can only be withheld for reasonable reasons. If the franchisor fails to respond within the 42-day period, consent is deemed granted. There is also provision for the franchisor to revoke consent within 14 days upon discovering critical new information.
Refer To Your Franchise Agreement
While the Code sets broad guidelines, your Franchise Agreement will dictate many specifics around transferring your franchise. Although it may not seem crucial at the outset of your franchise journey, it’s important to check assignment or transfer fees before signing any agreement. For further insights, you might also review our piece on what to do at the end of a franchise.
It’s also an area where negotiation is possible – if the franchisor is eager to maintain a positive relationship (and we’ve seen cases where our clients successfully negotiated minor adjustments), then you might be able to discuss lowering these fees. We can help with reviewing and negotiating your Franchise Agreement.
Many Franchise Agreements include a clause granting the franchisor first refusal to repurchase the franchise. If they decline, they may still exert considerable influence over your choice of buyer.
Remember, from the franchisor’s perspective, it’s the same as when you initially bought in. They are entrusting any franchisee with the responsibility to expand their brand, uphold its reputation, and earn financial rewards — so they need assurance that your potential buyer can deliver on those expectations. For further details on how to safeguard these interests, our article on Franchisees’ Legal Obligations is a great resource.
This is why there’s typically a cost to transferring a franchise. It takes time and money for the franchisor to assess the feasibility of the transfer and the suitability of the potential franchisee you wish to sell to, including expenses for professional advice from experts such as accountants and lawyers.
What Should I Know About Transfer Fees?
Transfer fees are outlined in the Franchise Agreement and are designed to cover a range of costs incurred by the franchisor during the process of transferring a franchise. These fees are calculated to recoup expenses such as administrative work, professional advice, and the costs of updating key documents.
Whether the franchisor opts to repurchase the franchise or consents to a transfer to a third party, they will need to engage in research and vetting. This process may typically involve:
- Seeking advice and expertise from an accountant and a lawyer
- Investing time and money in the vetting process
- Possibly organising additional training sessions
- Updating licences, such as for the premises, to reflect new names or details
- Changing stationery and other branding materials
How Much Is The Fee?
The transfer fee is specified in the Franchise Agreement, either as a set flat fee, as a percentage of the sale price or the initial franchise fee, or sometimes a combination of both. It is important to review these details before committing.
There is room for negotiation, particularly if you maintain open and honest communication. The franchisor has a vested interest in the overall success of the franchise network, and if they’re aware of the challenges you face, they may be supportive of a fair adjustment to the fee structure. In fact, our client success stories often highlight cases where negotiation led to a reduced transfer fee or the inclusion of a finder’s fee arrangement.
In such circumstances, you might negotiate a combination of a reduced transfer fee alongside a finder’s fee – ensuring that all these agreed terms are clearly documented in writing.
Can I Pass The Fee On To The Buyer?
Who pays the transfer fee is ultimately determined by the parties, but it is common for the fee to form part of the overall sale price if you wish to have the purchaser cover it. However, it often makes more practical sense for you, as the franchisee, to absorb the fee while factoring it into your sale price. An impartial appraisal and a realistic sale price—supported by market research such as that discussed in our business valuation guides—can streamline the process and help achieve a timely sale.
Ensure that every detail is clear and agreed upon in your Franchise Sale Agreement.
Anything Else?
Note that transferring your franchise is generally easier when both you and the franchisor are cooperative. Genuine, transparent negotiations tend to attract more interested purchasers. If you need additional support, our Franchise Agreement Check-Up service is available to help you assess your rights and obligations.
As of 2025, the updated Code of Conduct requires franchisors to disclose the percentage of franchisees involved in dispute resolution in the previous financial year—promoting higher transparency that can influence the perceived value of your franchise. Additionally, the Code now allows for a cooling off period of 14 days after control is transferred to the purchaser. Should the new franchisee terminate the franchise within that period, the transfer may be reversed and your transfer fees returned.
In addition, digital platforms and online franchise management systems have become critical in 2025. Franchisors now routinely use secure digital portals to process transfer requests, share essential documentation, and facilitate virtual meetings among parties. This modernisation not only streamlines the process but also reinforces compliance with the latest ACCC and regulatory standards. For further insights, explore our Intellectual Property Guide and Business Structure Guide.
Franchising Resources
Laws around franchising can be quite dense, and this area of law often requires expert legal guidance. We have a number of resources to assist you at various stages of the franchising process, such as:
- Selling A Franchise
- What To Do At The End Of A Franchise
- Legal Documents You Need For Franchising
- Franchise Agreements
- What Fees The Franchisee Has To Pay
- Terminating A Franchise Agreement
- What To Do With A Bad Franchisee
- Franchisees’ Legal Obligations
- What Are Franchising Royalties?
- Franchise Grant Process
Key Takeaways
- Read your Franchise Agreement carefully when considering selling your franchise
- Ensure you understand the Franchise Code of Conduct and follow its procedures within the prescribed time frame
- Remember that the franchisor is protecting their business interests and the transfer fee is designed to cover those costs
- Maintain an amicable relationship and negotiate the transfer fee in good faith
Selling your franchise may seem complicated, but by following the Code and the specific terms of your Franchise Agreement, remaining transparent, and seeking professional advice, you can navigate the process successfully.
Sprintlaw is well-equipped to guide you through the process. Don’t hesitate to reach out to us on 1800 730 617 or team@sprintlaw.com for an obligation-free chat.
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