If you’re selling your franchised business, your franchisor’s consent is almost always required. To give that consent, franchisors usually charge what’s called an assignment fee (also known as a transfer fee).
This is a fee the outgoing franchisee pays to the franchisor. It’s one of several conditions that must be met before a sale can proceed. A franchise lawyer can help you understand where this fee sits in the broader assignment process.
What does the assignment fee cover?
The fee isn’t just for permission. It’s usually paid in exchange for:
(a) The franchisor’s time and involvement
Franchisors often spend time assessing the proposed buyer, reviewing documents, and managing the process. Some also provide sale support or liaise with lawyers, accountants and brokers.
(b) Extra support needed for a new franchisee
Even if the business is established, a new owner needs help. Often, it’s similar to onboarding a brand-new franchisee. The franchisor may provide extra training, handover support and operational guidance.
How much is it?
The amount varies between systems. Common models include:
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A fixed fee (we often see $10,000),
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A percentage of the sale price, or
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A combo of both.
The franchise agreement should clearly set out how the fee is calculated. It’s typically listed as a precondition to consent in any transfer or sale.
A good franchise lawyer can help check what’s in your agreement — and whether the fee is reasonable.
Franchisors must act in good faith
Under the Franchising Code of Conduct, franchisors must act in good faith. That includes when they set and apply assignment fees.
A franchisor demanding a $100,000 assignment fee for a business worth far less may risk breaching the Code. That kind of imbalance could be challenged, especially if it prevents a genuine sale from proceeding.
Other common conditions
The assignment fee is just one condition. Others often include:
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The buyer being approved by the franchisor,
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Signing a new franchise agreement,
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Completing initial training, and
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Payment of legal or training fees.
These are all standard and should be listed in the franchise agreement. A franchise lawyer can walk you through them and flag anything unusual.
Can the franchisor deduct the fee from the sale?
Yes — and many do. Some franchisors require the seller to sign a direction to pay. This authorises the franchisor to receive the full sale price from the buyer. The franchisor then deducts what they’re owed (including the assignment fee) and passes the balance to the outgoing franchisee.
This approach gives the franchisor certainty and helps avoid last-minute disputes.
Final thoughts
If you’re thinking of selling your franchise, don’t overlook the assignment fee. It’s a key part of the process and one of several costs that can catch sellers by surprise. A franchise lawyer can help make sure the process is smooth, the fees are fair, and your agreement is complied with.
Thinking about a sale? Start with advice — and build from there.