Keeping a $70M Franchise Sale Alive Between Sign and Close

The situation

Gabriela and Mateo spent fourteen years building a group of quick-service restaurant franchise locations across southwestern Ontario, eventually operating more than two dozen stores under one franchise banner. A specialist physician named Marcia had put money into the business in its early years and still held a minority share, though she had never been involved in day-to-day operations. When a national operator approached Gabriela about buying the whole group, the three shareholders agreed it was time to sell. After months of negotiation, the parties signed a purchase agreement for a transaction in the range of $60 to $70 million, with closing set for six weeks later to give the buyer time to secure its own financing and complete regulatory filings.

Gabriela and Mateo had used a different lawyer to negotiate the purchase agreement itself, but brought our team in to manage the period between signing and closing — the part of a large sale that gets far less attention than the negotiation, and that can just as easily unravel a deal.

The gap between signing and closing

A purchase agreement for a business this size includes a long list of representations and warranties — formal statements the seller makes about the state of the business, covering everything from outstanding litigation to lease terms to employment matters. Attached to those representations is a set of disclosure schedules: documents that list every exception to those clean statements. If a representation says the company is not a party to any lease renewal currently under negotiation, and one is in fact underway, the disclosure schedule is where that gets disclosed. Schedules are not paperwork filed away and forgotten — they are the map the buyer relies on to know exactly what it is buying.

The trouble is that a business does not sit still for six weeks. In the gap between signing and closing, three things happened that were not reflected anywhere in the schedules attached to the signed agreement. The landlord for one of the group's busiest locations sent a renewal offer with a meaningfully higher rent, and Gabriela's operations team had already begun negotiating it. A regional manager who ran six of the stores resigned to take a job elsewhere, triggering a scramble to promote from within. And the company's main food supplier proposed a new pricing agreement that would have locked in higher costs for the next two years.

Under the terms of the purchase agreement, Gabriela and Mateo had agreed to a covenant — a promise about how the business would be run between signing and closing — requiring them to operate in the ordinary course and to notify the buyer of anything that would make the original representations inaccurate. They also faced a closing condition that the representations remain true, in all material respects, as of the closing date itself. That combination meant any of the three changes, left undisclosed, would give the buyer a real argument that the seller had breached the agreement — and, depending on how serious a court found the change to be, potentially a right to walk away from the deal or demand a lower price. None of the changes were the seller's fault. All three still had to be handled correctly.

What we did

1. Reviewed the purchase agreement's update mechanism first. Well-drafted agreements anticipate that things will change and include a specific process for updating the disclosure schedules before closing, along with rules about what happens if an update reveals something serious enough to matter. We confirmed the agreement Gabriela and Mateo had signed included this mechanism, and read closely to understand exactly what threshold triggered the buyer's right to object rather than simply accept the update.
2. Drafted supplemented disclosure schedules for all three changes. Rather than waiting to see which changes the buyer's due diligence team might catch on its own, we prepared formal schedule supplements describing the lease renewal terms, the manager's resignation and interim staffing plan, and the proposed supplier pricing — each supported by the underlying documents so the buyer could verify every detail independently.
3. Assessed materiality honestly before sending anything. Not every change needs to be treated as a crisis, and treating routine business activity as a major disclosure event can spook a buyer unnecessarily. We assessed each item against the financial scale of the transaction: the rent increase affected one location's economics by a relatively modest amount, the management change was a normal staffing transition with a credible succession plan already in motion, and the supplier proposal had not yet been signed. We characterized each item accurately rather than either downplaying or overstating it.
4. Delivered the updates promptly and in writing, with a proposed resolution attached. For the lease renewal, we proposed language confirming the seller would not finalize the new rent without the buyer's consent before closing, since the buyer would be the one living with those lease terms after the deal closed. For the supplier proposal, we recommended holding off on signing anything until after closing, so the buyer could make that call itself as the new owner. The manager's resignation required only clear disclosure and a summary of the transition plan, since it did not touch any representation the seller had made.
5. Negotiated the buyer's response directly with its counsel. The buyer's legal team initially flagged the lease renewal as a potential material adverse change — a legal term for a shift serious enough to undermine the basis of the deal — but backed off once it saw the seller had not finalized new terms and had built in the buyer's consent right. The other two items were accepted as routine updates without objection.
6. Confirmed the closing certificate matched the final position. At closing, sellers typically sign a certificate confirming their representations remain accurate as updated. We made sure that certificate referenced the supplemented schedules explicitly, so there was no gap between what had actually been disclosed and what the seller was certifying on closing day.

The outcome

The sale closed on the original date, at the full agreed price of roughly $65 million, with no reduction, no holdback tied to the disclosed items, and no post-closing claim from the buyer. The lease renewal was finalized after closing by the new owner on terms it negotiated itself. The supplier pricing agreement was never signed by Gabriela's team, leaving the buyer free to negotiate its own arrangement. The regional manager position was filled internally before closing, and the buyer kept the promoted employee on.

Marcia, as a minority shareholder with no operational role, received her share of the proceeds at closing along with Gabriela and Mateo and had no direct involvement in the schedule updates — a reminder that even shareholders who are not running the business day to day are relying on the sellers who are to handle exactly this kind of issue properly, since their payout depends on the deal actually closing.

What made the difference was not that nothing changed after signing. Something almost always does, on a deal that takes weeks or months to close. What mattered was that every change was disclosed as soon as it was known, characterized honestly rather than minimized, and paired with a proposed solution instead of left for the buyer to discover and react to. Buyers who feel ambushed by an undisclosed change go looking for leverage. Buyers who receive a clear, well-documented update with a sensible proposal attached usually just accept it and move on.

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