Purchase and Sale of a Franchise
Purchase and Sale of a Franchise 101
Sean Robertson and Robertson Legal Group, LLC focus their practice in the areas of business and franchise law. Our firm assists business owners and franchise owners with their business formation and incorporation, purchase and sale of a franchise, drafting of key commercial and business agreements, commercial real estate purchases and leases, and asset protection considerations for franchise and business owners.
Deciding to purchase a franchise business such as an educational franchise, a fast-food establishment, and/or any other type of business is a major transaction and significant financial undertaking. Hiring a qualified and skilled business attorney is an important investment in your family’s financial future.
Purchase of a Franchise: Letter of Intent
The first step in the purchase or sale of a franchise is the letter of intent. The letter of intent formally informs the seller that a buyer is interested in buying the franchise, and it includes the major terms of the proposed purchase, including:
- Amount to be paid for the prospective business to be purchased;
- Due diligence period and documents to be reviewed;
- The type and scope of assets to be purchased or sold;
- Non-compete, non-disparaging remarks, and/or non-solicitation provisions;
- Prospective closing date
- Key employees to keep;
- Franchisor transfer fee (for the purchase of a franchise);
- Public announcements or how the transaction will be publicized;
- Mention of any broker’s fees;
- Assumption of key liabilities including payroll, employment, and other tax-related issues through the Illinois Department of Revenue, Illinois Department of Employment Security, and/or IRS;
- Whether seller will provide financing through a promissory note and security agreement; and
- Exclusive bargaining arrangements between current franchise owner and prospective franchise owner.
Aurora Attorney for Asset Purchase Agreements
The letter of intent is not the final closing step; it is a conditional letter meaning that if everything goes well, the franchise closing will occur. The next step is the Asset Purchase Agreement, which is a written agreement that describes the conditions of the purchase and sale of a franchise. Most franchise agreements are Asset Purchase Agreements. With an asset purchase, the buyer is purchasing the assets of a franchise, including the goodwill, equipment, accounts receivable, intellectual property, and other items.
The Asset Purchase Agreement also describes the conditions of the closing such as the legal documents required to be presented, which may include:
- Corporate and LLC resolutions;
- Promissory notes and security agreements;
- Bank financing documents;
- Affidavits of title;
- Bills of sale;
- Escrow agreements;
- Non-compete, non-disclosure, and confidentiality agreements;
- Employment agreements;
- Assignments of commercial rental leases; and/or
- New commercial real estate leases.
Franchise Business Formation Attorney in Naperville
The setup and structure of your franchise operation whether you have one franchise or multiple franchises are critical decisions. Sean Robertson and his team at Robertson Legal Group, LLC are experienced in drafting incorporation documents such as bylaws and LLC operating agreements, corporate and LLC resolutions, and corporate and LLC minutes.
Our firm understands structuring holding and subsidiary corporations and Limited Liability Corporations to minimize liability exposure. Asset protection is critical because one lawsuit could destroy a business and their financial investment. Payroll, sales, and/or employment taxes can become huge liabilities, which are not easily erased. Inexperienced business owners often get into payroll and employment tax problems, which creates major business and personal obstacles for franchise owners.
Call 630-882-9117 Today
Sean Robertson and Robertson Legal Group, LLC are passionate about helping franchise owners make smart business and investment decisions. Sean Robertson is a graduate of DePaul University College of Law and the University of Illinois at Urbana-Champaign, as well as an experienced entrepreneur and business lawyer servicing franchise owners.
If you are a business owner in North Naperville, South Naperville, Wheaton, Aurora (Illinois), Geneva, North Aurora, or Winfield, and you are considering buying a franchise contact our office. Call 630-882-9117 or use our online contact form.