So what’s a bad buyer for a franchise, and can I stop my franchisor from selling to a bad buyer? In our experience, and we’ve helped people in over 400 different franchise systems, our definition of a bad buyer would be a buyer who was looking to come in – I call the red suspender buyers, that’s maybe not polite. But what I’m talking about is investment banker types who are looking to increase the cash flow in the short-term, and then turn around that purchase of the franchise into a sale and make some fast money at the expense of our franchisee clients.

Because they impose additional fees on the franchisees to drive down their profitability, take that money, show it the next prospective buyers, increasing their cash flow and then getting a multiple cash flow, and realizing that profit. That’s not the kind of buyer that’s good for franchising and certainly not good for our franchising clients. We want a buyer who recognizes, as the capable and responsible franchisors do that unless the franchisees are profitable long-term, this system is not gonna work and we don’t want to be a part of it. We like the good buyers, those who recognize improving franchisee profitability should be their goal number one, and to the extent they have the operational know-how to do it or they’ll acquire that operation know-how by bringing people in.

And, secondly, the financial capacity to deliver on that commitment, you know, if they have those two things, it’s good. If they don’t, it’s bad. And our position is that where we have good franchisor, we like to see the writing say that we will only sell to buyers who, number one, agree to assume the same responsibilities and commitment to the franchisees that we made, and, number two, have the operational and financial wherewithal to deliver. If they don’t do that, we have some potential claims related to their – against the seller in terms of interfering with our existing relationships with our current and prospective customers because by selling to a bad buyer.

You’ve destroyed our ability to stay in business and operate profitably, and there is a common law principle that says that may well be actionable, and we’re entitled to get out and recover our losses. So we have that opportunity, and then against the buyer, we have what we call a category two claim. If you aren’t delivering Mr. Bad Buyer on the types of commitments that you assumed in the documents that you took over from the selling franchisor, we have a claim against you for the damages that you’ve caused.