Can a franchisor approve the sale price, or only the buyer?

A franchisor may say it “has to approve the deal”. That can mean three different things: approving the buyer, approving the transfer, or approving the terms. Only your agreement can say which one applies to you, so it helps to separate them before the franchisor says anything about price.

What the Acts refer to

Ontario’s Act and British Columbia’s Act speak of a franchisor’s right, exercisable on reasonable grounds, to approve or disapprove “the grant”. Alberta’s Act speaks of a reasonable right to approve or disapprove “the sale”. These provisions sit in the disclosure rules. They list what does not make a resale one effected through the franchisor, so a franchisee’s resale can stay exempt from disclosure. They name that approval right and a transfer fee. Price is not among them.

Where price can still come in

Read whether the agreement requires you to give the franchisor the purchase agreement or its terms. If it does, the price is in front of the franchisor even if it cannot veto it. If the agreement gives the franchisor a right of first refusal or buyback right, price is the term it would match or set. Our answer on whether a franchisor can take back your location separates those rights from approval.

Ask what it is reviewing, in writing

If a franchisor objects to the price, ask which clause it relies on and on what grounds. Ontario’s and British Columbia’s Acts also say each party owes a duty of fair dealing in the performance and enforcement of a franchise agreement, including good faith and reasonable commercial standards. Whether an objection is consistent with that duty depends on the facts, and a lawyer should read it.

Keep the price terms conditional

Do not treat a price as settled until the franchisor has confirmed in writing what it must approve. Make your purchase agreement conditional on that approval, whatever it covers. If the franchisor refuses, our answer on what happens if the franchisor refuses to approve your buyer sets out the options.