Does my buyer inherit any penalties from defaults I had under the franchise agreement?

This depends heavily on how the transfer and the franchise agreement are structured, and on whether your buyer is entering an entirely new franchise agreement or somehow taking over your existing one. Where a buyer signs a fresh franchise agreement as part of the resale, past defaults tied to you personally as the prior franchisee generally don't automatically transfer as the buyer's own contractual breach — but unresolved consequences of those defaults, like unpaid fees owed to the franchisor or required remediation, can still affect the location and the franchisor's willingness to approve the transfer at all.

This is exactly the kind of thing that should surface in a resale disclosure document or through direct due diligence with the franchisor, and a buyer who doesn't ask about the seller's compliance history is taking on real, avoidable risk.

Because past defaults can affect both the transfer approval and what your buyer is really taking on, disclose them honestly rather than hoping they go unnoticed. A Treadstone business lawyer can help assess how past issues affect the current transaction.