Can a franchisor reject my buyer just because they already own a competing brand?

Generally yes, and this is usually treated as one of the more clearly legitimate grounds a franchisor can rely on. Franchisors have a genuine interest in protecting their brand, their confidential systems, and their relationships with other franchisees, and a proposed buyer who owns or operates a competing brand raises real concerns about conflicts of interest, misuse of proprietary information, or simply divided loyalty that most franchise agreements' transfer provisions are specifically designed to screen for.

This concern is generally treated as distinct from an arbitrary or discriminatory refusal, and the Arthur Wishart Act's duty of good faith and fair dealing is unlikely to override a franchisor's legitimate interest in avoiding this kind of conflict, particularly where the franchise agreement's transfer clause expressly addresses buyer qualifications along these lines.

If your prospective buyer has ties to a competing brand, it's worth raising this directly with the franchisor early, before you invest significant time in the deal, rather than discovering the objection late in the process. A Treadstone business lawyer can help assess how a franchisor is likely to view a particular buyer's background.