Buying a Franchise Resale: The Lease Clause Nobody Mentioned

The situation

Hassan worked as a retail associate for a large chain store, and his partner Imran worked as a factory technician on rotating shifts. Between them they had spent years talking about running something of their own, and when a franchise resale came up in London — an established quick-service food location with steady weekday traffic and a loyal regular crowd — they decided this was the one to chase.

The seller was Ji-ho, who had run the location for several years and was ready to retire. The asking price was roughly $185,000, covering the business's goodwill, its equipment, and a modest opening inventory. Hassan and Imran planned to fund it with about $60,000 in combined savings, a small business loan for roughly $100,000, and a vendor take-back note from Ji-ho for the remaining $25,000, to be repaid over the following two years out of the business's own cash flow.

Because the location operated under a franchise agreement, the deal was structured as a share purchase: Hassan and Imran would buy the shares of the corporation Ji-ho had used to hold the franchise agreement and the store lease, rather than buying the assets directly and starting a new corporation from scratch. A share purchase meant the existing contracts — the franchise agreement, the lease, the supplier accounts — would simply continue under new ownership, without each one needing to be individually reassigned. It is a common structure for small franchise resales, and on paper it looked like the simpler path to closing.

Hassan and Imran retained our team once they had a signed agreement of purchase and sale, with a closing date set about seven weeks out. That timeline felt comfortable to them. It did not stay comfortable for long.

What due diligence found

Due diligence on a small business purchase means pulling and reading every contract the business depends on — the lease, the franchise agreement, supplier agreements, equipment leases, any financing already in place — and checking each one for terms that could affect the buyer after closing. It is unglamorous work, and on a business this size, clients sometimes wonder whether it is worth the time. This file is why it is.

Buried in the commercial lease between Ji-ho's corporation and the landlord was a change-of-control clause. In plain terms, it said that if ownership of the tenant corporation changed — specifically, if more than 50% of its shares moved to new owners — the landlord's prior written consent was required before the change could take effect. Without that consent, the landlord had the right to treat the lease as breached, and to terminate it.

This mattered enormously for a share purchase. Hassan and Imran were not just buying a business; under this structure, they were about to become the new majority shareholders of the very corporation that held the lease on the premises the business operated from. If nobody asked the landlord first, the transaction itself could technically hand the landlord grounds to end the tenancy — leaving Hassan and Imran owning a corporation with a franchise agreement, some equipment, and no premises to run it out of.

The clause was not hidden or unusual. Change-of-control provisions are common in commercial leases, particularly for landlords who care who is operating in their plaza and want the ability to vet a new operator before a tenant's ownership changes hands. What made it dangerous here was timing. Ji-ho's own broker had not flagged it, the agreement of purchase and sale did not mention it, and left unaddressed, it would have surfaced only after closing — at the point where it was hardest and most expensive to fix.

What we did

1. Read the lease before reading anything else. On a franchise resale, the lease and the franchise agreement are usually the two contracts most likely to contain consent or transfer conditions, so our review started there rather than working through documents in whatever order the seller's side provided them.
2. Flagged the clause immediately and recalculated the timeline. Landlord consent is not usually instant. It typically involves the landlord reviewing the incoming owners' financial position, sometimes requesting personal guarantees, and taking time to decide. With seven weeks to closing, there was room to do this properly — but only if the request went out immediately rather than closer to the closing date.
3. Approached the landlord early, with a complete package. Rather than a bare request for consent, we prepared a submission that included Hassan and Imran's financial background, references, and a clear description of their intended operation of the business unchanged. Landlords consent more readily, and more quickly, when the request answers their obvious questions before they have to ask.
4. Ran the franchisor approval process in parallel, not in sequence. The franchise agreement itself also required the franchisor's approval of a new owner, involving its own background checks and training requirements. Rather than waiting for one approval before starting the other, both processes were pushed forward at the same time to avoid the two timelines stacking end to end.
5. Built landlord consent into the closing conditions. The agreement of purchase and sale was amended, with the seller's agreement, to make written landlord consent an explicit condition of closing. That gave Hassan and Imran a clean way to walk away from the deposit intact if consent had not come through, rather than closing on a share purchase and only afterward discovering the lease was at risk.
6. Kept Ji-ho's side of the process moving too. Because Ji-ho remained the corporation's registered principal until closing, the landlord's file review needed some cooperation on the seller side as well. Coordinating directly with the seller's lawyer kept requests for information from stalling in translation between two law firms.

The outcome

The landlord's written consent came through about ten days before the scheduled closing date, after roughly three weeks of review and a request for modest personal guarantees from Hassan and Imran, which they agreed to provide. The franchisor's approval followed a few days later, having run alongside the landlord process rather than after it. Closing went ahead on the original date, with no extension needed.

Hassan and Imran now operate the location as its majority shareholders, with the lease, the franchise agreement, and the supplier accounts all continuing exactly as they had under Ji-ho, just as the share purchase structure was meant to achieve. The vendor take-back note to Ji-ho is being repaid on schedule out of the business's cash flow, and the roughly $100,000 loan and $60,000 in combined savings covered the balance of the purchase price as planned.

Had the clause gone unnoticed, the likely outcome would have looked very different: a closing that technically transferred the shares while leaving the new owners in breach of the lease from day one, discovered only when the landlord noticed the change in ownership — possibly months later, and with far less goodwill on the landlord's part than an advance request would have earned. Catching it during due diligence, with weeks rather than days to work with, turned a serious risk into a routine approval.

What you can learn from this