Business owners who bought into a franchise often wonder, “Can I sell my business?” In short, yes, you can.
The Minnesota Franchise Act specifically entitles you to sell your business. This cannot be overruled by your franchise agreement. You may have to pay a reasonable transfer fee.
Can a Minnesota Franchise Be Sold?
Yes. The sale of an existing franchise business in Minnesota may be characterized as an “assignment,” “transfer,” or “sale.” Essentially, the seller (franchisee) is assigning the franchise agreement to the buyer. An assignment, transfer, and sale expressly authorized by Minnesota law.
In Minnesota, it is illegal for a franchisor to prohibit a franchisee from selling the business to another. Specifically, Minnesota Statutes section 80C.14 subdivision 5 provides:
It is unfair and inequitable for a person to unreasonably withhold consent to an assignment, transfer, or sale of the franchise whenever the franchisee to be substituted meets the present qualifications and standards required of the franchisees of the particular franchisor.
Can a Franchise Agreement Restrict a Sale?
No. It is illegal for a franchise agreement to prevent you from selling your business. This state law cannot be overruled by a franchise agreement. Section 2860.4400(H) of the Minnesota Administrative Rules provides:
All franchise contracts or agreements and any other device or practice of a franchisor, shall conform to the following provisions. It shall be unfair and inequitable for any person to: . . . (H) unreasonably withhold consent to any assignment, transfer, or sale of the franchise whenever the franchisee to be substituted meets the present qualifications and standards required of the franchisees of the particular franchisor.
Can Franchisors Charge a Transfer Fees?
Yes. Franchisors may require a reasonable transfer fee and training fee for the new buyer. The franchisor may also have reasonable standards for all franchisees, and the buyer must qualify. However, the franchisor cannot abuse these requirements to unreasonably prevent a franchisee from selling the business. “Reasonableness” is interpreted by a judge through the lens of prior cases dealing with these issues.