Who has to approve a franchise resale?

Buyers and sellers sometimes treat “getting approved” as a single event. In practice it is two unrelated processes, run by two organizations with different priorities, that both have to land favourably before the transaction can close.

Franchisor approval: screening the person, not just the price

The franchisor is evaluating whether this specific individual, and their financial position, experience and background, meet its standards for running a location under its brand. A buyer with an excellent offer on the table can still be declined outright if the franchisor is not satisfied on any one of these points.

Lender approval: a separate underwriting process

Whether financing comes through a conventional lender, the Canada Small Business Financing Program, or BDC, the lender is underwriting the buyer’s creditworthiness, down payment and the deal’s cash flow on its own terms. A franchisor-approved buyer can still be turned down by a lender, and a lender-approved buyer can still be declined by a franchisor — approval from one says nothing about the other.

Why the sequencing trips people up

• A lender often wants to see the franchisor has approved the buyer before finalizing financing
• A franchisor sometimes wants proof of financing before completing its own approval
• Neither party wants to be the one to move first, which can stall a deal that both would otherwise approve
• Building both approvals into the purchase agreement as express, time-limited closing conditions avoids the standoff

What actually goes wrong

The most common failure is a seller accepting an offer from a buyer who was never realistically going to clear both tracks, then losing months discovering that only once financing or franchisor approval falls through. Ask early, informally, whether the buyer looks financeable and franchisor-approvable before treating an offer as real.