Can a franchisor impose new capital improvement requirements on my buyer as a condition of transfer?

Often yes, particularly where your franchise agreement's transfer provisions give the franchisor discretion to require the location be brought up to current brand standards as a condition of approving a new franchisee — this is a fairly common practice, since franchisors use a change of ownership as a natural opportunity to modernize a location that may not have been renovated in some time, and it protects consistency across the brand as a whole.

Whether the specific requirements demanded are enforceable, or open to challenge, generally depends on whether your agreement's transfer clause actually contemplates this kind of condition, and whether the requirements are being applied consistently with how the franchisor treats other transfers and renewals across the system, rather than being singled out for your particular location without explanation.

Because capital improvement demands can be substantial and affect your buyer's overall investment and the deal's economics, get clarity on what's actually being required as early as possible in the transfer process. A Treadstone business lawyer can assess whether the franchisor's demands are grounded in your agreement or go beyond it.