Solicitor in Leicester for
Buying or Selling an Existing Franchise Business
I’ve worked with Steven for a number of yeears. Unusually for a lawyer, he is very commercially minded, and can get to the nub of issues straight away. Would thoroughly recommend him.
0116 3667 900
Solicitor in Leicester specialising in Franchise Business Purchases/Sales
Steven Mather Solicitor is a specialist franchise business sale and purchase solicitor in Leicester, backed by the national team at Nexa Law. Often called franchise resales, you really need a lawyer who knows what they’re doing with franchising law and franchise resales. If you are looking for legal advice on franchise share purchase agreements, franchise asset purchase agreements or other franchise business transactions, you’ve found the right lawyer. Every time Steven strives to provide:
- Plain English Advice
- Time – to understand your situation and all that you’re faced with
- Results – getting the deal done quickly
- Value – fixed fees for your certainty where possible
- Convenience – meetings by phone, video call or in-person at a time to suit you.
Urgent business sale/purchase Advice?
What to Consider When Buying an Existing Franchise?
Buying an existing franchise business can be a great way to get into franchising, especially for those who have never done it before. The main advantage of buying an existing franchise business is that you’ll be able to take advantage of its established reputation and customer base. However, there are also downsides to buying an existing franchise, such as losing out on the training that would be given by the franchisor during startup. So if you want to buy an existing franchise business, here are some legal issues that may arise when doing so.
What is an existing franchise?
Franchises are often sold by reference to a Territory- a geographic location in which the franchise business can operate. An existing franchise will be up and running, operational and already have clients/customers and a track record.
Buying an existing franchise business is often far easier than starting a business from scratch. The site will have been established, goodwill built up and a proven track record of sales and cash flow created. Trading risk can be mitigated to a greater extent than with a start-up franchise business.
The seller should be able to supply relevant accounts and historical financial data which can help you decide how profitable the operation has been in the past, what its likely future performance may be and whether it is worth buying at all.
What are you buying when you buy an existing franchise?
1. You get an established customer base – this gives you cash flow from day one – but of course means you need to pay more for the business than a new franchise.
2. You get an experienced team – usually the target business will have staff who will know the ropes and be able to operate the franchise according to the franchise system rules.
3. You get an established business – which means trading history, accounts, reputation, and more, giving you likely better access to finance, credit accounts and relationships with existing trade suppliers.
What are the legal steps to buying an existing franchise?
There are two primary ways of buying a franchise resale – Share Purchase or Asset Purchase.
An Asset Purchase (often where the seller is a sole trader) involves purchase certain assets from the seller, such as the client base, stock, equipment etc.
A Share Purchase involves purchasing 100% of the shares of the target company from the Seller. The target company remains in situ and so you take responsibility for any leases or other liabilities which the company might have.
- Disclosure (DD) – this is the process of learning about the company, the franchise and indeed the seller. You’ll want to see accounts information, of course, but usually you’ll want to ask a whole range of questions to gather information about the business. This is your chance, as one the sale has gone through, you will be lumbered with any issues and cannot do much about it then. You’ll want to know things like:
- What’s the franchisor’s system?
- What’s the franchisor’s reputation like?
- What’s the current business plan?
- Is there scope for growth or savings or increased profit?
- Why is the seller selling?
- Share Purchase Agreement or Asset Purchase Agreement – usually in a franchise resale, the Franchisor’s legal team will prepare the initial draft document. the Buyers team will then review before the Sellers review and any changes need to be agreed by all three parties. The transactional document creates a legally binding deal and includes a number of matters all of which are important, but in particular it will set out warranties.
- Warranties – sellers in a franchise resale are often reluctant to give too many warranties, but purchasers should push for them. Warranties are statements by the Seller that the thing being warranted is true – and can extend to proper running of the business, and cover any other issues that could crop up. It’s important to get the warranties right, and if you’re selling, to ensure that you disclose against warranties fully and effectively. See what is a disclosure letter here.
- Franchise Agreement – often on franchise resales, the Franchisor may ask you to enter in to a new Franchise Agreement (particularly so they can get the benefit of a personal guarantee from you).
We help buy and sell businesses in Leicester and the East Midlands. What you get with Steven is straight-talking, effective, excellent, professional advice. That level of service isn’t cheap, but if you want a great job doing and want to have direct contact with Steven rather than be passed down to a trainee, then you’ve found the right lawyer for your business.
Next Steps for your Franchise Business Sale/Purchase?
Whether you are buying or selling a franchise business, doing so as a share sale or an asset purchase, or you just don’t know – get in touch.
Steven’s typical client is probably like you – never bought or sold a business before – and so we’ll help you every step of the way.