Q&A - If I buy a franchise what happens to it if I die or become incapacitated?

11/07/2011

Q: I am in my mid-fifties and have been made redundant. I worked for the company for thirty years and got a good redundancy package so I am thinking of buying a franchise with my wife. Would I be able to pass the business on to my son in my Will and appoint him to run it if I become incapacitated - because my wife wouldn't be able to run a business on her own.

A: All franchise agreements should include a clause that clearly sets out what should happen in the event the franchisee dies or becomes incapacitated. The British Franchise Association Code of Ethics requires such provisions be fair and reasonable to the franchisee.

If a husband and wife own the franchise together, the death or incapacity of one of them will not normally result in the franchisor being entitled to put in a manager as they would expect the business to continue to be run by the surviving spouse (or partner). Should the franchise be owned solely by you however, the franchisor would usually include terms in the Agreement entitling them to appoint a manager to run the business in the event that you become temporarily incapacitated.

In the event of permanent incapacity or death, such temporary management would usually continue until such time as the franchisor is notified that a beneficiary of your Will wishes to take over the business or a buyer is found for it. Franchise Agreements will normally permit the franchisee to pass the business to a member of their family or other beneficiary, subject to that person being approved by the franchisor as suitable to run the business and undertaking the necessary training to run it.

Before entering into any Franchise Agreement it would be advisable to seek independent legal advice based on your particular circumstances and desired outcome.

John Marshall

John Marshall

Partner

A Partner and Head of our Probate, Wills, Tax and Trusts department in Wrexham

Victoria Wilson

Victoria Wilson

Senior Solicitor

Part of our Probate, Wills, Trusts and Tax team in Oswestry