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Do I have to pay a ‘transfer fee’ to the franchisor if I sell my franchise?
It is an important part of any franchise business that the franchise owner has the right to sell the business in much the same way that any business owner would have the right to sell. The difference in franchising is that the franchisor must approve the purchaser to make sure that the incoming franchisee is the sort of person the franchisor would like to have as a franchisee. Not only must the franchisor approve the franchisee, but the franchisor will incur costs in training the incoming franchisee, along with other administrative costs. Also, franchisors often have a databank of prospective purchasers and act as business transfer agents for their franchisees’ businesses. For all of these elements, you would expect the franchisor to charge a fee. In relation to ‘checking out’ an incoming franchisee, a fee of between £500-£1,000 is usually charged. In relation to training and other administrative costs, most franchisors charge a percentage of whatever their then current initial fee might be - usually 50-60 per cent. For acting as a business transfer agent, franchisors normally charge 5-10 per cent of the sale price of the business. Ultimately, what a franchisor is entitled to charge will be set out in the franchise agreement.
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