Buying an Existing Franchise Location: Transfer Fee is Negotiable
One of the provisions in most franchise agreements is a provision that requires the selling franchisee to pay a transfer fee to the franchisor. This transfer fee is sometimes $10,000 or more. I have represented a number of prospective franchisees that are buying an existing franchise location. In almost every instance the seller expects the buyer to pay for this transfer fee. And in almost every instance, the buyer is surprised to learn that who pays for the transfer fee is negotiable.
There is a strong argument the selling franchisee should pay the transfer fee. After all, the selling franchisee is legally obligated to pay for the transfer fee under the franchise agreement - not the buyer. But the reality is the seller will probably include it in their selling price anyway so a buyer should keep it in mind when determining what the business is worth.
If you're a buyer just be aware the price is negotiable. Buying the a business right (whether a franchise or not) is the first key to success. Pay too much and you're behind the eight ball from the start.
