How to Buy a Franchise Resale With Investors in 2026
by Raises.com
This article is general information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.
A franchise resale is funded like any small-business purchase, with one extra party who can stop the deal: the franchisor, whose consent to transfer and transfer fee sit in the seller's franchise agreement. Read that agreement before the LOI. Then build the stack: an SBA 7(a) loan when you will run the location, a seller note, and investor equity for the rest.
1. Read the transfer section before you sign an LOI
The seller's franchise agreement decides whether you can buy the location, and its transfer section is the part to read first. Look for five things.
- The franchisor's written consent, and what it may base a refusal on
- The transfer fee, and who owes it
- A right of first refusal that lets the franchisor match your price
- Whether you must sign the franchisor's current agreement, at its current rates
- Required remodels, training, or a cure of the seller's defaults before closing
The right of first refusal matters most. It lets the franchisor take your deal on your terms after you paid for the diligence. Ask in writing whether it will use it, before you pay for lawyers.
The consent is the step nobody budgets. Put the transfer fee in the sources and uses as its own line. Then put the franchisor's review of you, and any training it requires, on the closing calendar, because the seller is waiting through every week of it.
2. Get the FDD and read it like an investor
The FTC Franchise Rule requires a franchisor to give a prospective franchisee its Franchise Disclosure Document at least 14 calendar days before the franchisee signs a binding agreement or pays any money. On a resale, ask the franchisor for its current FDD before you sign anything with the seller. Give yourself the same 14 days.
Four items matter most to investors. Item 6 lists the other fees, and the transfer fee usually appears there. Item 17 sets out the renewal, termination and transfer terms in one table. Item 20 counts the outlets transferred, terminated and closed in each of the last three years, which tells an investor how often owners walk away from this brand. Item 21 holds the franchisor's audited financial statements.
Item 19 is the franchisor's earnings claim, if it makes one. Compare it line by line with the seller's tax returns, because the location you are buying has its own history.
3. Line up the franchise term against the loan
Count the years left on the seller's franchise agreement, plus any renewal right, and set them beside the loan term. A loan that outlives the franchise is secured by a business that may lose its sign. Expect the lender to ask.
If the franchisor makes you sign its current agreement at transfer, the term may reset, and so do the royalty and brand fund rates. Model the location on the rates you will pay. The seller's history ran on the old ones.
4. Stack the SBA loan, the seller note and the equity
When you will run the location yourself, an SBA 7(a) loan is the common senior debt, and the program caps a 7(a) loan at $5 million. A seller note keeps the seller invested in the franchisor's yes and in the first year after closing. The SBA's SOP 50 10 decides whether that note counts toward your equity. The rule has changed more than once. Investor equity fills what is left.
Investors come in through the company that owns the location, under Rule 506(b) when you raise from people you know or Rule 506(c) when you advertise and verify accreditation. Check whether the franchise agreement makes the franchisor approve your investors too. Some agreements require a personal guaranty from every owner above a set stake. Your investors need to hear that before they commit.
5. Answer what investors ask about the brand
Investors in a franchise location ask two questions an independent business does not raise: how much of each sale goes to the brand, and what the brand can make you spend. A royalty on gross sales is owed whether the location makes money or not. Model the royalty and the brand fund on their own lines.
Then list what the franchisor controls. Approved suppliers, required remodels, the territory and the right to terminate all sit in the agreement, and each one is a cost or a risk the investor carries with you. The brand is the reason the location sells. It is also a partner with the power to end the business.
What the client files show, and what they do not
Neither client quoted here bought a franchise. Cody Sechelski, CEO of Masterbuilt Ventures Holdings, worked with Raises.com® on his first acquisition, a family-run HVAC business bought with seller participation. Cody says it plainly: most deals that reach a letter of intent never close, and the ones that do make up what his case study calls the 10% club. A franchise resale adds one more party who can say no.
Ade, who worked with Raises.com® and closed two acquisitions, centered his thesis on defensible industries such as essential services, with capital preservation and returns that are predictable. A franchise location can fit that thesis. Its franchise agreement decides whether it does, because the brand's fees and rules set how predictable the returns are.
Franchise resale vs independent business purchase
| Item | Franchise resale | Independent business |
|---|---|---|
| Who must say yes | The seller and the franchisor, under the franchise agreement's transfer terms | The seller, plus the landlord if the lease is assigned |
| Extra costs at closing | The transfer fee, and any required remodel or training | None owed to a brand |
| Disclosure to read | The franchisor's FDD under the FTC Franchise Rule, plus the seller's books | The seller's books and contracts |
| Ongoing payments | A royalty and a brand fund contribution to the franchisor | No royalty |
| What limits the loan term | The years left on the franchise agreement and on the lease | The lease and the life of the assets |
Frequently asked questions
Does the franchisor have to approve a franchise resale?
Yes, when the seller's franchise agreement makes a transfer subject to its written consent. Without it, the sale cannot close.
Who pays the franchise transfer fee?
The franchise agreement says who owes it, and the purchase agreement decides who bears it. Settle that in the LOI.
Do I get an FDD when I buy a franchise resale?
Ask the franchisor for its current FDD, and give yourself the 14 calendar days the FTC Franchise Rule gives a new franchisee. Read Items 6, 17, 20 and 21 first.
Can I use an SBA loan to buy a franchise resale?
An SBA 7(a) loan can fund a resale you will operate yourself, up to the program's $5 million cap. Have the lender confirm the brand qualifies first.
What do investors ask about a franchise deal?
They ask how much of each sale goes to the brand and what the brand can make you spend. Show the royalty, the brand fund and the franchisor's controls in the model and the data room.
Raises.com® builds what sits under a franchise resale raise: the PPM, the subscription and operating agreements, the CFA financial proformas and the data room. With those in place the raise is legally and financially sound before an investor opens the franchise agreement. The buying side is at https://raises.com/buy-a-business. Strategy calls are at https://raises.com/call.
General information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.