Selling a Franchise Restaurant-Transfer Fee

When selling a franchise restaurant, how much is the Franchise Transfer fee? This question is one of the first questions EATS Restaurant Brokers wants to know from franchisees interested in selling a franchise restaurant. Franchises have various Franchise Fees, but one fee is significant for reselling a restaurant, and it’s the Franchise Transfer Fee.

The most common Franchise Fee is the Initial Franchise Fee paid by the franchisee to the Franchisor. The initial fee is a one-time payment for the right to operate as a franchisee. This fee is typically paid at the time of the signing of the Franchise Disclosure Document (FDD).

Initial franchise fees can range from $10,000-$75,000, depending on the Franchise Restaurant Brand. Generally, franchise transfer fees are 50% of the initial franchise fee.

Potential franchisees are usually aware of becoming a franchisee they will be required to pay royalty fees, marketing fees, renewal fees, advertising fees but are unaware of the transfer fee.

Who pays the Franchise Transfer Fee can be negotiated between the restaurant seller and the potential buyer. Restaurant sellers naturally want the buyer to pay the transfer fee, and our company agrees, but why do we agree?

EATS Restaurant Brokers- Franchise Business Consultants explains why the buyer should pay the Transfer Fee:

  • The buyer is paying for the Franchisor’s required training before a sales transaction can be complete. The new franchisee is required to train for 2-6 weeks, depending on the franchise brand.
  • Sellers are commonly required to pay for restaurant upgrades before a Franchise Restaurant can be sold to bring the restaurant up to current franchise specs. This can include equipment upgrades, signage upgrades, POS sales system upgrades, new chairs, new tables, and other required upgrades.
  • Restaurant upgrades cost to a seller can range from $5,000-$100,000. The buyer benefits from the upgrades.
  • The buyer received the right to operate as a franchisee under the previous owners remaining franchise term years on the original FDD.
  • The franchise fee is separate from the sales price. The restaurant seller does not benefit from the franchise transfer fee.
  • The restaurant is turn-key for the new buyer.
  • The buyer is usually paying half the fee of the initial franchise fee restaurant seller paid to have the franchise’s rights.

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