Selling a Franchise? Here’s What You Must Disclose to Avoid Lawsuits
Selling a Franchise? Here’s What You Must Disclose to Avoid Lawsuits
Selling a franchise location can be a smart business move — whether you’re ready to retire, shift investments, or move on to a new opportunity. But franchise resales come with legal rules that many sellers don’t fully realize until a deal is already in motion.
When disclosures are incomplete or handled incorrectly, even a “good” sale can quickly turn into a legal dispute involving the buyer, the franchisor, or both. That’s why working with a franchise law attorney early in the process is one of the best ways to protect yourself and keep the transaction on track.
At Rybicki Law Firm, PLLC, we help franchise owners in Dallas-Fort Worth and across the United States sell their franchise businesses correctly, with the right disclosures and document review to reduce risk and avoid litigation. Here’s what you need to know before you list your franchise for sale.
Why Disclosures Matter When Selling a Franchise
Franchise resales are not like selling an independent small business. Your franchise agreement and federal franchise rules require certain information to be provided to prospective buyers.
If a buyer later claims they were misled — even unintentionally — you could face:
- Claims for misrepresentation or fraud
- Demands for repayment or rescission (undoing the deal)
- Expensive litigation and settlement pressure
- Potential involvement from the franchisor
- Damage to your reputation and future business plans
The right disclosures aren’t just a formality. They’re a legal safeguard for everyone involved.
Rybicki Law Firm, PLLC works with franchise sellers to ensure disclosures are accurate, complete, and timed correctly under the law.
1. The Franchise Disclosure Document (FDD)
In many franchise transactions, the Franchise Disclosure Document (FDD) must be provided to the purchaser. The FDD contains critical details about the franchise system and the buyer’s obligations.
Depending on the franchisor and the state involved, the buyer may receive:
- The current FDD from the franchisor
- A transfer-specific disclosure package
- Additional state-required resale documents
Even when the franchisor provides the FDD, sellers can still be held responsible if they make statements that conflict with it.
A franchise attorney from Rybicki Law Firm, PLLC can help you understand what the buyer must receive and what you should avoid saying or promising.
2. Your Financial Performance and Business Records
Buyers are making a major investment. They will want to know how your franchise location has performed and what they can realistically expect.
You may need to disclose:
- Profit and loss statements
- Tax returns
- Sales reports
- Vendor costs and labor expenses
- Any major changes in revenue trends
But there’s an important rule: you can’t make claims about future earnings unless they match what the franchisor allows. If sellers exaggerate income or “project” numbers without support, lawsuits follow.
At Rybicki Law Firm, PLLC, we help sellers share financial information in a way that is truthful, supported, and aligned with the franchisor’s standards.
3. Material Facts About the Franchise Location
“Material facts” are details a buyer would reasonably consider important when deciding whether to buy.
These can include:
- Pending lawsuits involving the location
- Health or safety violations
- Major equipment issues
- Lease problems or landlord disputes
- Loss of key staff
- Customer or market changes impacting sales
If something could affect the value of the franchise, it’s safer to disclose it properly than ignore it and hope it doesn’t come up later.
Rybicki Law Firm, PLLC can guide you through what counts as material and how to disclose it correctly.
4. The Franchise Agreement and Transfer Terms
Most franchise agreements include strict rules about resale, including:
- Required franchisor approval
- Transfer application procedures
- Transfer fees
- Buyer training obligations
- New agreement signing requirements
- Non-compete clauses that may apply to sellers
Many deals collapse because sellers don’t fully understand these obligations until late in negotiations.
Rybicki Law Firm, PLLC reviews franchise agreements and transfer conditions to help you avoid delays, surprise costs, or disputes with your franchisor.
5. Any Side Promises or Verbal Statements
One of the most common sources of franchise resale lawsuits isn’t the paperwork — it’s informal promises.
Examples of risky statements:
- “You’ll definitely make back your investment in a year.”
- “The franchisor will approve you for sure.”
- “This territory is protected forever.”
- “Costs always stay about the same.”
Even if you’re trying to be helpful, verbal assurances that aren’t backed by the franchisor’s documents can expose you to claims later.
A lawyer at Rybicki Law Firm, PLLC can help you communicate with buyers safely and avoid language that creates legal risk.
6. State-Level Requirements for Franchise Resales
Some states require extra steps for resale transactions, including registration states that regulate franchise sales more aggressively.
Depending on where the buyer lives or where the franchise is located, additional disclosure or approval rules may apply. Skipping them can create serious legal consequences.
Because Rybicki Law Firm, PLLC works with franchise sellers nationwide, we help identify state-level requirements early and ensure your sale remains compliant across borders.
What Happens If You Fail to Disclose Properly?
Failure to disclose required information — or disclosing it incorrectly — can lead to:
- The buyer suing you for damages
- The buyer seeking to cancel the sale
- The franchisor stepping in to block or challenge the transfer
- Regulatory penalties in certain states
- Costly, drawn-out litigation
These cases often come down to what was said, what was provided, and when. That’s why legal guidance on the front end is usually far less expensive than defending a lawsuit later.
How Rybicki Law Firm, PLLC Helps Franchise Sellers
Selling your franchise should move you forward, not pull you into a dispute. At Rybicki Law Firm, PLLC, we help sellers handle franchise resales the right way, including:
- Reviewing your franchise agreement and transfer rules
- Helping assemble accurate, compliant disclosures
- Advising on financial record sharing and earnings claims
- Coordinating with franchisors when approval is required
- Identifying state disclosure requirements for nationwide transactions
- Protecting you from avoidable liability in the sales process
Our goal is to help the sale close smoothly while protecting your financial future.
Selling a Franchise? Get Legal Guidance Before You Sign Anything
Franchise resales can be profitable and straightforward — when they are handled correctly. The key is ensuring the buyer receives the right disclosures, your statements stay consistent with the franchise system, and your deal follows the franchisor’s transfer process from start to finish.
If you’re preparing to sell a franchise location, don’t wait until a problem appears.
Call Rybicki Law Firm, PLLC at 469-951-8765 to schedule a consultation. We assist franchise sellers in Dallas-Fort Worth and nationwide with clear, practical legal guidance designed to protect your interests and keep your transaction moving forward.
Visit www.klintrybicki.com to learn more.
