If you are a sole individual franchisee, you may be wondering what will happen to your franchise when you, unfortunately, pass on. What’s more, your franchise can be put at risk if you incur a more serious illness or a permanently incapacitating injury. Continue reading to learn how your franchise will be handled once you die and how one of the experienced franchise law attorneys at FortmanSpann, LLC can help you properly plan.

What will the fate of my franchise be when I die?

Notably, the Franchising Code of Conduct does not specifically state what to do when a franchisee or their nominated representative incurs serious illness, incapacity, or death. With this, you must diligently check the terms and conditions of your franchise agreement to see if there is a clause about this event.

Namely, a well-equipped franchise agreement will offer a range of processes if such a dramatic event were to occur. Examples are as follows:

  • Your agreement may entitle a franchisor to manage your business until you or your nominated representative recovers.
  • Your agreement may entitle another franchisee in the network to manage your business until you or your nominated representative recovers.
  • Your agreement may entitle your personal representative (i.e., your attorney) or your family member (with proper training) to manage your business until you or your nominated representative recovers.
  • Your agreement may entitle your personal representative to sell your business when you pass on.
  • Your agreement may entitle a franchisor to buy back your business when you pass on.
  • Your agreement may enable a negotiated surrender of the agreement when you pass on.
  • Your agreement may enable a franchisor to terminate the agreement when you pass on.

What are the laws surrounding the transfer of a franchise?

Say, for instance, that you believe it is the best decision to transfer your franchise to your beneficiaries upon your passing. Simply put, the regulations surrounding this transfer will depend on the state in which you reside.

For one, some states may allow your surviving heirs the opportunity to participate in the ownership of your franchise for a reasonable time after your death. An example of a state that follows this procedure is California.

On the other hand, some states may allow a franchisor to sell, transfer, or issue your securities after your death. In addition, a franchisor may be allowed to restrict the sale, transfer, or issues of your stocks and debentures to your surviving heirs after your death. This is so long as such sale, transfer, or issuance does not result in the sale of your franchise. Examples of states that follow this procedure are Arkansas, Nebraska, and New Jersey.

To find out what the regulations in your state are, speak with one of the skilled franchise law attorneys today. We await your phone call.