Top Tips for Foodservice Franchisees

Tips for Selling a Franchise

1. Pay attention to the length of any indemnification for representations and warranties in the Purchase and Sale Agreement. Some contracts are completely open-ended, which means that a claim against a seller can be brought forever into the future. Besides having good title, paying sales taxes, and a few other representations, there should not be more than a two-year limit for when claims can be brought against a seller.
2. Make sure Purchaser is aware of existing vendor contracts, and there is a specific assumption agreement wherein Purchaser agrees to assume the specified contracts.

Tips for Purchasing a Franchise

1. Consider an escrow of a portion of sales proceeds to be held for some period of time to take care of seller’s unpaid sales taxes (for which purchaser is liable in many states) and other items, especially if Seller is leaving the franchise system.
2. Make sure you have a good lien search, and all loans are paid off, and the bank or other lienholder has agreed to release their lien(s) on all restaurant(s) purchased by specific address(es).

Tips for Purchasing or Selling a Franchise

Do not rely on emailed wire instructions, as those can be hacked. Confirm all email wire instructions verbally from the sender, who should be someone you know or you are sure is at the proper entity you are dealing with.