- Most franchise agreements restrict the franchisee’s ability to sell, assign, or transfer the franchise without the franchisor’s prior written consent.
- While every franchise system’s agreement is different, conditions in this area tend to fall into similar categories: Because these terms live in the specific franchise agreement rather…
- Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 generally requires a franchisor to give a prospective franchisee a disclosure document before a franchise agreement is signed or…
Selling a franchised business is not the same as selling an independent one. Beyond the buyer, the seller, and the usual due diligence, there’s a third party sitting at the table with real approval rights: the franchisor. Transferring a franchise agreement to a new owner generally can’t happen without going through the franchisor’s process, and that process shapes the whole timeline and structure of the deal.
This article walks through how franchisor consent typically works, what conditions franchisors commonly attach, and the disclosure questions a franchise resale raises under Ontario’s Arthur Wishart Act.
Franchise Agreements Are Not Freely Assignable
Most franchise agreements restrict the franchisee’s ability to sell, assign, or transfer the franchise without the franchisor’s prior written consent. This is standard across the industry — the franchisor has a legitimate interest in who operates under its brand, so the agreement typically gives it a say before a new owner steps in, separate from whatever the buyer and seller have negotiated between themselves.
That means a franchise resale is really two negotiations running at once: the commercial deal between buyer and seller, and the approval process with the franchisor. Skipping or underestimating the second one is one of the most common ways a franchise resale gets delayed.
Conditions Franchisors Commonly Attach to a Transfer
While every franchise system’s agreement is different, conditions in this area tend to fall into similar categories:
| Condition | What It Typically Involves |
|---|---|
| Buyer qualification | Franchisor reviews the buyer’s financial standing and business background before approving |
| Training requirements | Buyer (and sometimes key staff) must complete the franchisor’s required training program |
| Updated agreement | Buyer may be required to sign the franchisor’s current-form franchise agreement, rather than simply stepping into the seller’s older one |
| Transfer fee | Many systems charge a fee payable to the franchisor to process a transfer; the amount is set by the individual franchise system, not by law |
| Right of first refusal | Some agreements give the franchisor the right to buy the location itself on the same terms before approving an outside buyer |
| Store condition or renovation | Franchisor may require upgrades to bring the location to current brand standards |
Because these terms live in the specific franchise agreement rather than in general law, there’s no substitute for reading that agreement’s transfer provisions closely before assuming a deal can close on the buyer and seller’s timeline alone.
Disclosure Under the Arthur Wishart Act
Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 generally requires a franchisor to give a prospective franchisee a disclosure document before a franchise agreement is signed or any related payment is made. Whether a particular resale to a new franchisee triggers a fresh disclosure obligation depends on the specific transaction and the Act’s regulations. This is genuinely fact-specific, and a buyer shouldn’t assume either way without having it reviewed.
Where disclosure is required, the Act builds in reader protections: a franchisee who receives no disclosure document at all may generally rescind within two years of signing, and one who receives late or materially deficient disclosure may generally rescind within 60 days of receiving it (figures as of mid-2026 — verify the current rules before relying on them). These timelines are worth a buyer understanding even in a resale context, because they affect how much protection you have if something in the process goes wrong.
Don’t Forget the Premises Lease
Most franchised locations operate from leased premises, and the lease is a separate contract from the franchise agreement. Assigning that lease to the new owner generally requires the landlord’s consent too. Under Ontario’s Commercial Tenancies Act, where a lease restricts assignment without consent, that consent is deemed not to be unreasonably withheld unless the lease itself says otherwise, but the lease’s specific wording still controls first, so it needs to be reviewed alongside the franchise transfer terms, not as an afterthought.
A Buyer’s Franchise Resale Checklist
- [ ] Review the franchise agreement’s assignment or transfer clause in full
- [ ] Confirm what franchisor approval process and timeline applies
- [ ] Ask whether a transfer fee or renovation requirement applies
- [ ] Confirm whether a current-form franchise agreement will replace the existing one
- [ ] Determine whether a fresh disclosure document is required for this transfer
- [ ] Review the premises lease’s assignment clause and confirm landlord consent
- [ ] Complete any required franchisor training before the target closing date
Frequently asked questions
Can a franchisor simply refuse to approve a buyer?
Franchise agreements vary, but many give the franchisor meaningful discretion over approving a transfer, sometimes subject to a reasonableness standard set out in the agreement itself. Reviewing the specific transfer clause tells you how much discretion applies in your case.
Does the seller or the buyer usually pay the franchisor’s transfer fee?
This is a matter of negotiation between buyer and seller and is often addressed in the purchase agreement, though the franchise agreement determines that the fee is owed to the franchisor in the first place.
If we received full disclosure when the original franchisee bought the location years ago, do we need new disclosure now?
Not necessarily, but this depends on the specific transaction and the Arthur Wishart Act’s regulations, and it should not be assumed either way. Have this reviewed as part of your due diligence.
What happens if the franchisor doesn’t respond to a transfer request in time?
Franchise agreements typically specify a process, and sometimes a response timeline, for transfer requests, but what happens if the franchisor is silent depends on that specific agreement’s wording. This is another reason to review it closely at the start of the deal, not partway through.
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