Although the FTC-required disclosure documents are mandatory for first-time purchasers of a franchise, there are no required government disclosure documents that must be furnished to the buyer of an existing franchise business. The seller of the franchise is not required to provide the would-be buyer with the franchiser’s disclosure document.
You will want to very carefully study the terms of the existing franchise contract between the existing franchise and the franchiser. How long is its remaining term? Is the price reasonable? Will the operator compete with you afterwards? How does it compare with new franchises the franchiser sells to others? Will you be acceptable to the franchiser? Franchisers invariably have right to approve the transfer or sale of a franchise, or even to negotiate the right to buy back the franchise, and you don’t want to be a seller’s stalking horse.
An investment in a franchise is a substantial commitment of your money, your time, and your reputation. Our advice is to retain a lawyer to assist you in the process. It usually pays for itself many times over.
If you have any questions, contact Fredrick P. Niemann, Esq. toll free at (888) 800-7442 or e-mail him at fniemann@hnlawfirm.com. He is happy to answer your inquiries.