In order to sell a franchisor, or to obtain an equity investment in your franchisor entity, you will need to engage a lawyer. Ideally, you will want to choose a lawyer highly familiar with franchising.
Your lawyer, after engagement, will then want to assess the legal landscape that your franchisor company presents. As part of this process, determinations will be made as to whether your legal house is in order, and all franchise and other legal documents that will be needed by the buyer are in existence and in proper form. Based upon your objectives, the team will provide guidance on the most efficient process for completing the legal aspects of the sale.
Early on, you are likely to need a:
- Non-Disclosure Agreement (“NDA”) for prospective buyers,
- Letter of Intent (“LOI”) or Term Sheet,
- Legal review of the Summary Offering (that describes the franchise system in order to attract buyers), and
- Legal review of the complete Deal Book (as prepared by your M&A Advisor).
In anticipation of prospective buyers being identified, you will also need legal advice regarding setting up and populating the due diligence dataroom and managing due diligence requests. Also, a Stock (or Asset) Purchase Agreement will need to be drafted, along with accompanying disclosure schedules. This process will require advice as to representations, warranties, indemnifications, possible earn-out structures, hold-backs and other transactional details. Along the way, corporate structuring, financing, and tax advice is likely to be required. Depending on the terms of the deal, there may also be need for employment agreements; intellectual property, franchise, and other assignment agreements; bills of sale; and real estate purchase and lease agreements.
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This description of legal work is for informational purposes only, and should not be construed as legal advice. The actual legal work that you will need will depend on the specifics of your transaction. Your lawyer will advise as to the legal work needed in both the franchise and corporate areas in order to proceed with your transaction. You should not act, or refrain from acting, based upon information on this website without seeking and engaging professional legal counsel.