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Is there any legal difference between a new franchise and a resale?
Under both a new franchise and a resale you will have to enter into a franchise agreement and be bound by all of its restrictions and obligations. So there is a strong similarity between the two, but there are also very important differences. On a resale you will be taking on an existing franchise that has been operated by the seller of the business. In addition, unless the franchisor agrees to do it, the franchisor does not have to provide you with any initial training or any of the other initial obligations that franchisors provide to ‘new’ franchisees. In practice, however, the franchisor will want to train you so there needs to be a direct contractual link with the franchisor, under which the franchisor agrees to do this. Further, you need to check with the franchisor that you will be entitled to a new franchise agreement for its full term. You also need confirmation that you will be able to renew the franchise in the same way as a newly appointed franchisee. The most significant difference from a legal perspective is that when you acquire an existing franchise business you have to enter into a very detailed business purchase agreement, which will seek to protect you from any unknown liabilities that you take on. It is important to obtain legal advice on the terms of that agreement.
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Companies to Consider
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