By Keith L. Gross, Esq. · Gross Law Group, P.A. · Last reviewed October 23, 2026
Key takeaways
- A franchisee's ability to sell the business is controlled mainly by the franchise agreement. Item 17 of the FDD summarizes the transfer, right-of-first-refusal, and death-or-disability provisions (16 CFR § 436.5(q)).
- Typical transfer conditions include curing defaults, buyer qualification and training, a transfer fee, a general release, and signing the then-current franchise agreement.
- The wording of the approval standard, such as "not unreasonably withheld" versus "sole discretion", often decides transfer disputes.
- A transfer is not a "sale of a franchise" under the FTC Rule if the franchisor has no significant involvement with the buyer (16 CFR § 436.1(t)).
- Post-term non-competes against former franchisees are presumed reasonable in time in Florida at one year or less and unreasonable at more than three years (Fla. Stat. § 542.335(1)(d)).
Who this article is for
This article is for franchisees planning to sell, buyers acquiring an existing franchised location, and franchisors drafting or applying transfer provisions. If you are looking at all of the ways to leave a franchise, including non-renewal and negotiated exits, see our article on exiting a franchise agreement.
Why transfers lead to disputes
For a franchisee, the right to sell is often the main way to recover the money and years invested in the business. For a franchisor, every transfer puts a new operator under its brand. Those interests usually align, but disputes arise when a sale is delayed, conditioned on terms the seller did not expect, or refused, and when a franchisor exercises a right of first refusal at a moment the seller considers unfair.
Where the transfer rules are found
Item 17 of the FDD must include a table titled "THE FRANCHISE RELATIONSHIP" that cross-references and summarizes the agreement's provisions on, among other things (16 CFR § 436.5(q)):
- Assignment of the contract by the franchisor
- "Transfer" by the franchisee, as the agreement defines it
- Franchisor approval of a transfer by the franchisee, and the conditions for approval
- The franchisor's right of first refusal to acquire the franchisee's business
- The franchisor's option to purchase the franchisee's business
- Death or disability of the franchisee
- Non-competition covenants during the term and after termination or expiration
- Dispute resolution, choice of forum, and choice of law
Item 17 is a summary. The franchise agreement, and sometimes a separate development agreement, guaranty, or lease, controls. A "transfer" is often defined broadly to include a sale of assets, a change in ownership of the franchisee entity, and sometimes a change in control among existing owners.
Common transfer conditions
Transfer conditions vary from system to system, but agreements commonly require some combination of the following:
- All monetary obligations to the franchisor and its affiliates are current, and any defaults are cured
- The buyer meets the franchisor's current qualifications for new franchisees, including financial and operational criteria
- The buyer completes the franchisor's training program
- Payment of a transfer fee
- The buyer signs the franchisor's then-current form of franchise agreement, which may carry different royalties, fees, territory terms, or a new term length
- Remodeling or upgrading the location to current brand standards
- A general release of claims by the seller in favor of the franchisor
- The seller's continued compliance with post-term covenants, including confidentiality and non-competition
- Landlord consent to assignment of the lease, and lender approval if financing is involved
Some of these conditions, especially the new form agreement and the general release, are where sellers and buyers are most often surprised. A buyer's financing and valuation may depend on terms the buyer has not yet seen.
The approval standard
The words used for the franchisor's approval matter. An agreement that says the franchisor's consent will not be unreasonably withheld reads differently from one that reserves approval to the franchisor's sole discretion, and both read differently from an agreement that lists objective conditions and requires approval when they are met. Florida recognizes an implied covenant of good faith and fair dealing in contracts. It generally cannot be used to override an agreement's express terms, but Florida courts have applied it to limit arbitrary or capricious use of discretion where an agreement grants discretion without stating how it must be exercised. Reading the precise language, together with any written transfer policies the franchisor has adopted, is the starting point in any transfer dispute.
Rights of first refusal and purchase options
Many franchise agreements give the franchisor a right of first refusal: when the franchisee receives a bona fide offer, the franchisor may buy the business on the same terms within a set period after notice. Some agreements also give the franchisor an option to purchase at a formula price on termination or expiration. Disputes tend to involve whether an offer was bona fide, whether the notice was complete, whether the franchisor matched all material terms, and whether the seller changed the deal after the franchisor waived its right. Buyers sometimes hesitate to invest in due diligence when they know the franchisor can step in, so sellers should plan for the right of first refusal when marketing the business.
Does the buyer receive an FDD?
Under the FTC Franchise Rule, the "sale of a franchise" does not include a transfer by an existing franchisee when the franchisor has had no significant involvement with the prospective transferee, and the franchisor's approval or disapproval of a transfer alone is not significant involvement (16 CFR § 436.1(t)). When a franchisor is more involved with the buyer, such as by recruiting the buyer or negotiating directly with the buyer, disclosure obligations may apply. Many franchisors provide their current FDD to transferees as a matter of practice, and a buyer who will sign the franchisor's current agreement has good reason to review the current FDD.
Death or disability
Item 17 also covers what happens when a franchisee dies or becomes disabled. Agreements commonly give the estate or family a limited time to transfer the franchise to a qualified buyer or to an heir who meets the franchisor's standards, and some allow the franchisor to manage the location in the meantime. Franchise owners should coordinate these provisions with their estate planning so the family is not forced into a rushed sale.
Transfers, defaults, and termination
A pending sale does not suspend the franchise agreement. Most agreements require the seller to be in good standing before a transfer is approved, and a default notice during the sale process can derail the deal. In multi-unit arrangements, cross-default provisions can link one location's problems to others; see our article on multi-unit franchise agreements. For what happens when either side breaches, see what happens when a franchise agreement is violated.
Florida does not have a general franchise relationship statute that regulates termination or transfer for most industries, so the franchise agreement and general contract law usually control. Some industries, such as motor vehicle dealers, are governed by their own Florida statutes.
The seller's obligations after the sale
A selling franchisee usually remains bound by confidentiality obligations and post-term restrictive covenants. Florida's restrictive covenant statute provides that a court shall presume reasonable in time a post-term restraint against a former franchisee of one year or less and presume unreasonable a restraint of more than three years (Fla. Stat. § 542.335(1)(d)). Personal guaranties may also continue for obligations that arose before the transfer. See our article on franchise non-compete clauses.
Resolving transfer disputes
Most franchise agreements specify how disputes are resolved, including mediation or arbitration, the forum, and the governing law, and Item 17 summarizes these terms. Because transfers are time-sensitive, a negotiated solution that keeps the sale on track is often the most valuable outcome for everyone. See our article on resolving franchise disputes without litigation.
How Gross Law Group helps
Gross Law Group's franchise practice represents franchisees selling their businesses, buyers acquiring existing franchised locations, and franchisors drafting and applying transfer provisions. We review the franchise agreement and Item 17, plan around rights of first refusal and approval conditions, negotiate with the other side, and handle disputes when a transfer stalls. Learn more about our franchise law practice or read our Florida franchise law guide.
Frequently asked questions
Can a franchisor refuse to approve the sale of my franchise?
It depends on the franchise agreement. Agreements typically list transfer conditions and the standard for approval, such as a requirement that consent not be unreasonably withheld or a reservation of the franchisor's sole discretion. Item 17 of the FDD summarizes these provisions, but the agreement itself controls.
What is a right of first refusal in a franchise agreement?
It is a contractual right for the franchisor to buy the franchised business on the same terms as a bona fide offer the franchisee has received, usually within a set number of days after notice. If the franchisor declines, the sale can usually proceed to the third-party buyer on the terms offered, subject to the other transfer conditions.
Does the buyer of an existing franchise get an FDD?
Not always. Under the FTC Franchise Rule, a transfer by an existing franchisee is not a "sale of a franchise" if the franchisor has had no significant involvement with the buyer, and approval or disapproval of a transfer alone is not significant involvement (16 CFR § 436.1(t)). Many franchisors provide their current FDD to transferees anyway.
Does Florida have a law that limits franchise terminations or transfer refusals?
Florida does not have a general franchise relationship statute regulating termination or transfer for most industries; the franchise agreement and general contract law usually control. Some industries, such as motor vehicle dealers, have their own Florida statutes.
Can a franchisor terminate my franchise while I am trying to sell it?
A pending sale does not by itself stop the franchisor from enforcing the agreement. Most agreements require the franchisee to be in good standing before a transfer is approved, and many allow termination after notice and an opportunity to cure certain defaults. Timing matters, so talk to a franchise attorney before you list the business.
About the author
Keith L. Gross, Esq. is the founding attorney of Gross Law Group, P.A. His practice focuses on franchise law and trademarks for franchisors and franchisees. Before law school he built several businesses. He is admitted to practice in Florida.
Disclaimer: This article is general information about the law as of the review date above. It is not legal advice and does not create an attorney-client relationship. The right answer depends on your specific facts and documents. Consult a licensed attorney before selling, buying, or approving the transfer of a franchise. See our full disclaimer.