Buying a Franchise Resale: Transfer Approval, Fees, Seller Notes and the Financing Timeline
A franchise resale is the purchase of an existing, operating franchise location from its current owner. Instead of building a unit from scratch, you step into a business with customers, employees, equipment and a sales history.
Resales can be attractive, but they involve more parties than most business purchases. A typical franchise resale includes a buyer, a seller, a franchisor that must approve the transfer, a landlord that may need to consent to a lease assignment, and a lender. Each party works on its own timeline. Buyers who understand how those timelines fit together close more smoothly and avoid expensive surprises.
This guide focuses on the franchise resale process. If you are mainly interested in the loan products used to buy an existing location, see our guide to franchise acquisition loans.
How a Franchise Resale Differs From a Typical Business Purchase
In most small business sales, the buyer and seller agree on terms and close. In a franchise resale, the franchisor has contractual rights over who can own a location in its system. The franchise agreement typically:
- Requires franchisor approval before the franchise can be transferred
- Sets conditions the seller and buyer must meet for approval
- May give the franchisor a right of first refusal to buy the location itself on the same terms
- May require a transfer fee
- May require the buyer to complete training before taking over
- May require the buyer to sign the franchisor’s current form of franchise agreement
These terms are described in Item 17 of the Franchise Disclosure Document and in the franchise agreement itself. Review them with a franchise attorney early, because they affect price, timing and financing.
Assignment of the Existing Agreement or a New Agreement?
One of the most important questions in a resale is what agreement the buyer will operate under.
Assignment of the Existing Agreement
Some franchisors allow the seller’s existing agreement to be assigned to the buyer. In that case, the buyer takes over the remaining term. If only a few years remain, a lender may be reluctant to extend a loan that runs past the end of the franchise term without renewal rights.
A New Franchise Agreement
Many franchisors require the buyer to sign the current form of franchise agreement, often with a new term. That can help with loan term, but the current agreement may carry different royalty rates, advertising fees or obligations than the seller’s agreement. Your projections should use the fees you will actually pay, not the fees the seller has been paying.
Our guide to how lenders read a Franchise Disclosure Document explains why the franchise term and fee structure matter to your loan.
Costs to Budget Beyond the Purchase Price
The purchase price is only part of the cash required to complete a franchise resale. Depending on the franchisor, the landlord and the condition of the location, you may also need to budget for:
- Transfer fee — often paid to the franchisor as a condition of approval; the agreement specifies who pays it
- Training costs — travel and time for required franchisor training
- Required upgrades or remodels — some franchisors require the location to be brought to current standards as part of a transfer
- Equipment replacement — older equipment may need replacement soon after closing
- Working capital — money to operate the business during the transition
- Professional fees — legal, accounting and valuation costs
- Lease-related costs — security deposits or other conditions of a lease assignment
A lender will look at the total project cost, not only the purchase price. Items such as remodel requirements and working capital can sometimes be included in the financing, so identify them before you apply.
The Franchise Resale Timeline, Step by Step
Every deal is different, but most franchise resales move through similar stages.
1. Initial Review and Pre-Qualification
Before making an offer, review the listing, request the unit’s financial statements and confirm the brand’s status on the SBA Franchise Directory if you plan to use SBA financing. A preliminary conversation with a lender helps you understand what purchase price the unit’s cash flow can support.
2. Letter of Intent
The letter of intent outlines price, structure, key contingencies and timing. Include contingencies for financing, franchisor approval, lease assignment and due diligence.
3. Franchisor Application
Contact the franchisor early. Most franchisors have a formal application for transfer buyers, which may include financial information, background checks and interviews. Ask for the franchisor’s expected timeline and any conditions of approval, such as remodel requirements.
4. Due Diligence
Verify the unit’s financial performance, review tax returns, inspect equipment, review the lease and speak with the franchisor about the location’s compliance history. Talk with other franchisees in the system about their experience.
5. Loan Application and Underwriting
Submit the full loan package, including the purchase agreement, the unit’s financial history, your personal financial information and the franchisor’s transfer documents as they become available. Lenders focus on the unit’s historical cash flow when evaluating an acquisition.
6. Franchisor Approval and Training
Franchisor approval, training completion and any required agreements are often conditions that must be satisfied before closing.
7. Lease Assignment
The landlord may need to approve the assignment of the lease or sign a new lease with you. Lenders usually want the lease term to support the loan term.
8. Closing and Transition
At closing, funds are disbursed, the franchise is transferred and you take over operations. A transition period with the seller may help with staff, vendors and customers.
The most common cause of delay is running these steps one after another rather than in parallel. Starting franchisor, landlord and lender conversations early can shorten the overall timeline.
How Seller Financing Fits Into a Franchise Resale
Sellers sometimes agree to finance part of the purchase price with a promissory note. In a franchise resale, seller financing can help bridge a gap between the price and what a lender will finance, and it keeps the seller invested in a smooth transition.
When seller financing is combined with an SBA loan, SBA rules control how the seller note must be structured and whether it can count toward the buyer’s equity. Those rules include standby requirements that limit payments on the seller note. Our article on buying a business with 5% down under the SBA seller-note rules explains how seller notes are treated in SBA acquisitions.
Also check the franchise agreement. Some franchisors have requirements about debt or security interests involving the franchise, and the franchisor may need to be aware of the financing structure.
SBA Rule Changes That Affect Resales
SBA’s updated rules, SOP 50 10 8.1, apply to SBA loans that receive a loan number on or after October 1, 2026, and include changes to how change-of-ownership loans are evaluated. Expect lenders to focus closely on the unit’s actual financial history, and confirm with your lender what role the seller may have after closing. See our overview of SBA franchise loan changes for 2026 for details.
Questions to Ask the Seller
- Why are you selling, and how long have you owned the location?
- Can you provide tax returns and financial statements for recent years?
- Does the franchisor require any remodel or upgrade as part of the transfer?
- How much time remains on the franchise agreement and the lease?
- Who pays the transfer fee?
- Are you willing to provide a transition period or seller financing?
- Are there any pending compliance issues with the franchisor?
Questions to Ask the Franchisor
- What is your transfer approval process and typical timeline?
- Will I sign a new franchise agreement or take assignment of the existing one?
- What fees will I pay under my agreement?
- Are there any required upgrades for this location?
- What training must I complete before closing?
- Do you have a right of first refusal, and how is it exercised?
Frequently Asked Questions
Is it easier to finance a franchise resale than a new unit?
A resale has an operating history lenders can evaluate, which can help. However, the purchase price must be supported by that history, and franchisor and landlord approvals add steps.
Who pays the franchise transfer fee?
The franchise agreement usually addresses the transfer fee, and buyers and sellers sometimes negotiate who bears it. Confirm the amount and responsibility early.
Can the franchisor block a sale?
Franchise agreements typically require franchisor approval for a transfer, and approval is subject to conditions described in the agreement. Some agreements also give the franchisor a right of first refusal.
Can I finance a required remodel as part of the purchase?
In many cases, required improvements can be included in the project cost. Identify them early so they can be built into the loan request.
Final Thoughts
A successful franchise resale depends on coordination. The purchase price, franchisor approval, lease assignment, required upgrades and financing all need to line up. Buyers who understand the process and start every conversation early are far more likely to close on time and on budget.
US Professional Funding provides franchise business acquisition financing for buyers of existing franchise locations. We can help you structure financing around the realities of a franchise transfer.
