Franchise Resale Due Diligence: What to Request, In What Order

A buyer of a new franchised unit is handed the franchisor’s disclosure document at least 14 calendar days before signing a binding agreement with, or paying, the franchisor or an affiliate in connection with the proposed sale, unless an exemption applies, because 16 CFR 436.2(a) makes failing to do so an unfair or deceptive practice.

A buyer of an existing unit is generally handed nothing by the seller. Under the Rule that seller is not a “franchise seller”, so the duty that produces that document does not run through them.

The franchisor is a separate question. Under 16 CFR 436.1(t), the transfer exclusion applies where the franchisor has “no significant involvement” with the prospective transferee; approval or disapproval alone does not count. The agreement and training conditions below are reasons to ask a franchise attorney what disclosure is required in this transaction, not a conclusion that every resale is exempt.

Everything below exists because of that gap. We are an independent publisher, not a franchise broker and not a law firm, and this is a starting list rather than a complete diligence process. Your attorney, accountant and property adviser will add items specific to your transaction that this page does not cover.

The five FDDs quoted below (issued February to April 2026) cover Smoothie King, PJ’s Coffee, The Human Bean, Jamba and Robeks. The Human Bean’s February FDD was amended May 5, 2026. Franchisors reissue their FDDs at least once a year; confirm each term in the brand’s current FDD before relying on it.

Stage one: the four documents to request before spending anything

Ask for these before you commission a survey, a lease review or an accountant. They are cheap to request and any one of them can end the conversation.

1. The franchisor’s current disclosure document. Section 436.1(j) excludes existing franchisees who sell only their own outlet and are otherwise not engaged in franchise sales on behalf of the franchisor from the franchise-seller definition. Request the current FDD directly from the franchisor too. You may not have to rely on them at all: some states publish disclosure documents free and in full.

2. The seller’s own franchise agreement. This is the request that is easiest to overlook, and it may matter more than the disclosure document. The disclosure document tells you the terms on offer today. Only the seller’s agreement tells you the terms that produced the trading history you are being shown. In 3 of the five 2026 FDDs quoted here, Item 17 expressly requires a then-current agreement for the transfer category compared, which means the two documents can differ on royalty, marketing fee, term length and renewal.

3. Item 17 of the current disclosure document. The transfer provisions. Smoothie King’s runs to nine separate conditions, several of which land on the buyer and cost money.

4. Item 20’s transfer table. Item 20 reports transfers by state for each of the last three years. That is a system-level answer to a question the seller cannot give you neutrally: how routinely units at this brand actually change hands.

Stage two: the questions no disclosure document answers

The disclosure document describes the system; it does not replace the records of the store you are buying. These are the unit-level questions, and each one needs a source outside the FDD.

Why the seller is leaving. Ask it first, ask it, and then verify it independently against the unit’s records and the franchisor’s account of the relationship. Have your advisers check the answer against the records and transaction disclosures.

The unit’s compliance history with the franchisor. This one has teeth. Smoothie King’s Item 17 conditions include that all monetary and other obligations are satisfied and that the franchisee is in compliance with the agreement, and The Human Bean requires the seller to be in good standing. Those attach to the seller, not to you, which means a seller’s own default can block your purchase. Ask the franchisor directly whether the unit is in good standing, rather than asking the seller.

The lease. Remaining term, renewal options, rent escalations, and whether the landlord will consent to an assignment. A franchise agreement with ten years left, sitting on a lease with two, is a different proposition from what it appears to be.

The equipment. Age, condition, service history, what is owned outright and what sits on a lease or finance agreement that may not transfer with the business.

Any required remodel or upgrade. Smoothie King’s transfer conditions require the transferee to remodel the premises. That is a capital cost arriving at the moment of purchase with no specification and no amount stated anywhere in its Item 17, so establish the current image standard with the franchisor and price the work with a builder before agreeing terms. Not every brand states a remodel condition, so check your own.

Training obligations and their cost. In 5 of the five 2026 FDDs quoted here, Item 17 includes a training condition: Smoothie King requires completion; PJ’s Coffee names the franchisee, manager or responsible employees (Section 13.2(vii) identifies the transferee/assignee); The Human Bean says “… obtains training if required …”; Jamba requires the transferee and proposed General Manager to complete training before transfer at the transferee’s expense; Robeks requires successful completion. Ask whether training is charged separately, how long it runs, and where it takes place.

Staff. Who stays, what they are paid, what they know, and whether any of them hold the relationships the unit runs on.

Stage three: the two clocks that can end the deal late

Both of these can terminate a purchase after a buyer has spent real money. If the seller is already in default, the clocks are shorter still; buying a distressed franchise covers the termination events three state statutes allow without a cure period.

The right of first refusal. Smoothie King’s first condition for approving a third-party transfer is that it does not exercise its right of first refusal. In 5 of the five 2026 FDDs quoted here, Item 17 reserves a refusal right. In 4 of the five 2026 FDDs quoted here, row n states no exercise deadline: Smoothie King, PJ’s Coffee, The Human Bean and Jamba. Robeks states 30 days. Compare the provisions and their separate agreement clocks before commissioning expensive work. An omitted period in a summary is not proof that the agreement has no deadline.

The approval process. Smoothie King’s Item 17 sets out nine conditions and states no timeline for working through them. Ask the franchisor for a typical elapsed time and what causes delays, and get it before you agree a closing date with the seller.

The order matters. Both are cheap to ask about and expensive to discover late, which is why they belong ahead of the survey and the lease work rather than after them.

Stage four: state law, and one state that changes the answer

If you are buying in New York, the seller’s own registration exemption is conditioned on giving you disclosure. New York General Business Law Section 684(5)(c) requires the franchisee to furnish the prospective purchaser a copy of the franchisor’s currently registered offering prospectus “at least one week prior to the execution of any binding contract or purchase agreement, or at least one week prior to the receipt of any consideration, whichever occurs first.”

The New York condition is state-specific. Which state’s law governs your transaction, and what it requires, are questions for a franchise attorney at the start.

What this page will not do

It will not tell you what a unit is worth, what to pay, or what to offer. That work belongs with an accountant who has seen the books and a broker or valuation professional who works in the category, and it is outside what a website can responsibly do.

What it can do is make sure that when you get to that conversation, you are holding the documents rather than hoping someone hands them to you.

The request list, in order

This is a starting list. It is not complete, and it does not cover items your own advisers will identify, including litigation history, insurance claims, health-inspection records, tax liabilities, and vendor arrangements.

1. Franchisor: current disclosure document.
2. Seller: executed franchise agreement.
3. Franchisor: Item 17 transfer conditions and the agreement sections they cite.
4. Franchisor: refusal exercise period, in writing, by section number.
5. Franchisor: typical approval timeline, in writing.
6. Franchisor: written confirmation that the unit is in good standing.
7. Seller and landlord: lease, remaining term, assignment clause and consent process.
8. Seller and lender: equipment schedule, condition, age and attached finance or lease agreements; confirm financing obligations with the lender.
9. Franchisor: current image or remodel specification and whether the unit complies.
10. Franchisor: training requirements, duration, location and separate charges.
11. Franchisor: transfer fee and other charges falling on the buyer.
12. Franchisor: Item 20 transfer counts for the last three years.
13. Seller: staff list with roles, tenure and pay.
14. Seller and franchisor: governing-law provisions in the sale and franchise agreements; ask your attorney to confirm which state’s law applies.

Take this request list into your first seller call

Pair it with our free 10-step franchise due-diligence checklist: the FDD items, validation calls, financing and attorney review to work through before you buy. Plus the full kit.

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Questions to ask a franchise attorney

• What disclosure am I entitled to in this transaction, and from whom?
• Is the franchisor’s involvement here more than approving or declining me?
• How do the seller’s agreement and the current form differ, clause by clause?
• Which transfer conditions attach to the seller, and what happens if they are not met?
• How long does the franchisor have to exercise its right of first refusal?
• What happens to my deposit and my diligence costs if the franchisor refuses approval?
• Does the lease assignment need landlord consent, and what happens if it is withheld?
• Am I taking on any of the seller’s liabilities, and how is that structured?

Buying or selling an existing franchise: resale basics, where to find resales, resale vs. new, transfer approval, right of first refusal, transfer fees, owner death and succession, distressed franchises.