What if the franchisor’s approval expires before my financing commitment?

A franchise purchase runs on two clocks. The franchisor’s approval of the buyer may carry its own deadline, and the lender’s commitment may carry another. If the first ends before the second is ready to fund, the deal can stall even though both parties still want to close. Start by knowing both dates.

Find both dates and their conditions

In the franchisor’s approval letter, look for an expiry date, any conditions still outstanding such as training or paperwork, and what it says happens at lapse. In the lender’s commitment, look for its expiry and its conditions, including whether it needs the franchisor’s approval to be current when funds advance. If either document is silent on expiry, ask for the answer in writing.

Ask for an extension early

Write to the franchisor before the approval lapses. Give the reason, the new target closing date and a request that the approval cover that date. Keep every reply. Ontario’s and British Columbia’s franchise Acts each say a franchise agreement imposes a duty of fair dealing in its performance and enforcement, including good faith and reasonable commercial standards. Whether that duty bears on how a franchisor handles an extension request, and whether any refusal breaches it, is a question for a lawyer.

Build the sequence into the offer

Put dated conditions in the purchase agreement for franchisor approval and for financing, and give the buyer a way to extend the closing date if one is delayed. Make closing conditional on the approval being in effect on closing day. Our answer on how long a financing condition period should be discusses setting that window.

If it lapses anyway

Ask whether the franchisor treats a lapsed approval as a new application, whether the buyer is screened again, and whether a transfer fee already paid is credited. The Canadian Franchise Association notes that several provinces regulate franchising and that there are important differences between jurisdictions, so confirm which regime governs your agreement.