A Couple Split a Franchise Purchase Unevenly and Wanted It in Writing

The situation

Before they came to us, Naomi and Sakura had already spent two months trying to work out the math themselves, first on a shared spreadsheet, then in a series of increasingly frustrated phone calls. The plan was straightforward on its face: buy an existing franchise location together, a mid-sized quick-service restaurant near the highway that Yasmin, the outgoing franchisee, had operated for over a decade and was now selling to retire. The complication was money. Naomi, a forklift operator, had roughly seventy percent of the capital available, mostly from a workplace injury settlement she had invested conservatively for several years. Sakura, a dental assistant, could put in the remaining thirty percent, largely from savings, and wanted to be an equal partner in running the location day to day.

Their first attempt at a solution was a simple verbal agreement: split ownership fifty-fifty regardless of the capital imbalance, with Naomi's extra contribution treated informally as a loan Sakura would pay back out of future profits, on no fixed schedule and no interest. It felt fair in the moment, a way to honour both the money and the labour each of them expected to put in. It did not survive contact with the franchisor's paperwork. The franchise agreement required a formal buyer entity with a defined shareholder structure before the resale could proceed, and neither Naomi nor Sakura could explain, when asked directly by the franchisor's counsel, what would happen to the informal loan if the business struggled, if Sakura wanted out, or if Naomi passed away before it was repaid.

They tried a second version with a friend's suggestion of a partnership agreement template found online, which raised as many questions as it answered and used terminology neither of them fully understood, including terms about capital accounts and dilution that meant nothing to either a forklift operator or a dental assistant without a business background. Every attempt at fixing the gap themselves cost them another week of the runway they had before the franchisor's deadline, and every conversation about it left both of them a little more frustrated with a business decision that should have felt exciting.

By the time they came to us, roughly six weeks before the franchisor's resale deadline, they were no longer disagreeing about the business itself. They agreed on the price, the location, and the plan. What they needed was a structure that turned an informal understanding into something enforceable, before the deadline passed and the resale opportunity went to someone else. Naomi was also clear that she did not want the arrangement to feel like she was simply lending Sakura money with an ownership label attached. She wanted a partnership that reflected both of their contributions honestly, in a form that would hold up if either of their circumstances changed.

What the review found

Reviewing what Naomi and Sakura had put together, the core problem was not the split itself but the absence of any mechanism to track it. A fifty-fifty ownership split combined with an informal, undocumented loan from one shareholder to the other creates exactly the kind of ambiguity that causes partnerships to fail later, not because the people involved are dishonest, but because memory and goodwill are not a substitute for terms. Without a written loan agreement, there was no interest rate, no repayment schedule, and no answer to what happened to the debt if the business was sold, if one of them left, or if one of them died. Without documented share terms, there was no way to show the franchisor, or a future buyer, or a bank, how ownership and control were actually meant to work.

The second issue was control. A straight fifty-fifty split with two shareholders creates deadlock risk by design: if Naomi and Sakura disagreed on a significant decision, neither could outvote the other, and the franchise agreement's requirement for prompt, unified decision-making on operational matters left no room for a stalemate to sit unresolved. Given that the two of them had already disagreed sharply enough over the capital split to need outside help, a structure that could lock up entirely under future disagreement was a real risk, not a theoretical one.

The third issue was more practical than legal: cost and predictability. Both Naomi and Sakura told us clearly, in the first meeting, that what mattered most to them was not an elaborate structure but one they could understand, afford, and rely on holding up without further legal intervention every time a question came up. A structure that was legally correct but required a lawyer's involvement every time a decision needed interpreting would not have served them, however sound it looked on paper. That constraint shaped the entire approach: use share classes and a documented loan rather than a more elaborate shareholder agreement with mechanisms neither of them would remember how to use.

There was also a timing pressure layered on top of all of this. Yasmin, the seller, had her own retirement plans tied to the resale closing on schedule, and the franchisor's approval process for a new ownership structure typically took several weeks on its own. Any further delay caused by Naomi and Sakura's structure negotiations risked pushing the whole transaction past the point where Yasmin was willing to keep the deal open, since she had another interested buyer who had already made a backup offer.

What we did

1. Incorporated a numbered holding company to serve as the franchisor's approved buyer entity, meeting the franchisor's requirement for a formal corporate structure and giving Naomi and Sakura a clean vehicle to hold their respective interests separately from their personal finances and any future debts either of them might take on individually, with the incorporation completed quickly enough not to eat further into the franchisor's deadline.
2. Created two classes of common shares reflecting the actual capital split, with Naomi holding seventy percent of the equity and Sakura thirty percent, so ownership on paper matched contribution in fact rather than the equal split they had initially assumed was the only fair option available to them, and so a future sale or refinancing would divide proceeds the same way the money had gone in.
3. Documented Naomi's additional contribution as a formal shareholder loan to the company rather than an informal advance to Sakura personally, with a fixed interest rate set at a commercial rate rather than an arbitrary figure, a repayment schedule tied to the business's projected cash flow, and clear terms for what happened to the balance if the business was sold or if either shareholder exited early.
4. Drafted a shareholder agreement addressing decision-making that gave Sakura an equal operational voice in day-to-day management, which mattered more to her than equity percentage, while reserving major financial decisions, like taking on debt, hiring senior staff, or selling the business, for a vote weighted by ownership share, so the two levels of decision-making could not be confused with each other and neither buyer had to guess which category a given decision fell into.
5. Built in a straightforward buyout mechanism so that if one of them wanted to exit, the other had a defined process and valuation formula for buying out the departing shareholder's interest, removing the need to negotiate exit terms from scratch under pressure at a later, more difficult moment when emotions might run higher, tying the valuation formula to the business's own financial statements rather than a subjective appraisal so neither side could later argue the number had been chosen unfairly.
6. Negotiated the transaction timeline with Yasmin's lawyer to accommodate the additional week the share structure work required, explaining candidly why the extra time was needed rather than simply asking for it, while still keeping the deal inside the window Yasmin needed for her own retirement plans, so the structuring work did not cost Naomi and Sakura the deal itself or hand the location to the backup buyer waiting in the wings.
7. Reviewed the structure with the franchisor's counsel before finalizing it, walking through how the share classes, the shareholder loan, and the weighted voting provisions would each interact with the franchise agreement's ownership and control clauses, and confirming in writing that the holding company satisfied every one of the franchisor's approval conditions before the paperwork went final, avoiding a delay that would have pushed the purchase past the resale deadline entirely.
8. Walked Naomi and Sakura through every document in plain terms, section by section, so both of them could explain the structure back to us in their own words before signing, which was the clearest test of whether the paperwork actually met their stated goal of something they could rely on without repeated legal help down the road.

The outcome

The purchase closed within the franchisor's deadline, with the share structure and loan documentation in place before Yasmin transferred the franchise licence to the new holding company. Naomi holds seventy percent of the holding company and is owed a documented, interest-bearing loan reflecting her larger contribution. Sakura holds thirty percent and an equal voice in the operational decisions that affect her daily work at the location, which was the piece she cared most about protecting throughout the negotiation, even more than the equity percentage itself.

The structure has already been tested once, informally, when a supplier contract renewal required a decision neither of them initially agreed on. Because the shareholder agreement set out clearly which decisions needed a simple discussion and which needed a weighted vote, the disagreement resolved in a single conversation rather than escalating the way their original capital-split negotiation had, months earlier, before the terms existed on paper. That was the outcome they were actually looking for: not a guarantee against disagreement, but a way to work through it without it turning into the kind of impasse that had already cost them two months before they sought help.

Naomi and Sakura still run the location together, dividing operational responsibilities roughly evenly despite the unequal ownership split, which both of them say reflects the deal they actually wanted from the start, before the paperwork got complicated. The loan is being repaid on schedule from the business's cash flow, and the franchisor has raised no concerns about the ownership structure since approving it. Yasmin closed her sale on the timeline she needed for her own retirement, and the backup buyer she had lined up never had to be called. For Naomi and Sakura, the biggest change was less tangible than the paperwork itself: they now had a shared vocabulary for talking about the business's money, one that replaced the vague, uncomfortable conversations they used to have about who owed what and why.

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