What to Do When a Franchisee Wants Out

• Is it financial struggles, burnout, misalignment, or personal reasons (health, family, retirement)?
• Understanding why they want out helps determine the best solution (support, restructuring, or exit).

The franchise agreement outlines exit terms, including:

• Transfer clauses (selling to another approved buyer).
• Termination provisions (with/without cause).
• Franchisor’s right of first refusal (franchisor can buy it back before a third party does).
• Both sides should re-read these terms before making moves.

• Support & Coaching – Sometimes additional training or operational support can help turn things around.
• Expense Management – Temporary relief from any fixed expenses, refinancing any debt, cost reduction analysis.
• Change of Management – If the issue is burnout, a manager could be hired.

If resale isn’t viable, the agreement may allow termination. There may be:

• Exit fees
• Obligations to cover debts
• Non-compete clauses

Both sides should consult:

• Franchise attorney – ensures compliance with agreement.
• Accountant/financial advisor – evaluates tax impact, debts, and asset valuation.

• Exits handled with respect protect the brand’s reputation.
• A bitter exit can lead to disputes, lawsuits, or negative publicity.
• A smooth exit shows future franchisees that the franchisor is fair and professional