Can I be sued by my franchisor for selling without getting their consent first?
Yes, this is a real risk, and it's one of the more serious mistakes a franchisee can make in a resale. Franchise agreements almost universally require franchisor consent before a franchisee sells or transfers the franchise, and proceeding without it is typically treated as a breach of the agreement — potentially giving the franchisor grounds to terminate the agreement altogether, pursue damages, or refuse to recognize your buyer as a legitimate franchisee regardless of what you and the buyer privately agreed between yourselves.
This risk exists independently of whether your buyer would otherwise have been approved; the breach is failing to follow the required process, not necessarily anything about the buyer's own qualifications. Even where you're confident the franchisor would have said yes, skipping the consent step can undermine the whole transaction and expose you to liability you didn't need to take on.
Never close a franchise sale without the franchisor's documented, formal consent, however confident you feel about the outcome. A Treadstone business lawyer can make sure this step is properly completed before you proceed.
Key takeaways
- Selling without required franchisor consent is generally treated as a breach of the agreement.
- This can give the franchisor grounds to terminate, pursue damages, or reject the buyer outright.
- The breach exists regardless of whether the buyer would likely have been approved anyway.
- Always obtain documented franchisor consent before closing, however confident you feel about approval.