The clause you haven't read yet may be the one that determines your timeline.
Most franchise operators have read their franchise agreement once — at signing. They know the broad strokes: territory, royalties, renewal terms, transfer requirements. The real property provisions are rarely the part anyone dwells on.
Until they're pursuing a sale-leaseback and an attorney finds the ROFR clause in Section 14.3.
Here are the specific franchise agreement provisions that affect sale-leaseback transactions, what they mean, and what to do about them.
1. Right of first refusal on real property
The most consequential clause. Some franchise agreements give the franchisor — or occasionally the area developer — the right to purchase any real property owned by the franchisee at the same price and terms offered by a third-party buyer, before the franchisee can complete the sale.
What the ROFR process looks like: When you receive a bona fide offer (the LOI from a sale-leaseback buyer), you notify the franchisor per the agreement's notice requirements. The franchisor then has a specified period — typically 30-60 days — to exercise or waive the ROFR. If they exercise it, they step into the buyer's position at the same terms. If they waive it, the original sale proceeds.
What this means for your SLB timeline: A ROFR adds 30-60 days to the timeline, minimum. If your franchisor's standard is a 45-day notice period, your 45-day exclusivity LOI becomes a 90-day process before you can close.
What to do: Before executing an LOI, confirm whether your franchise agreement contains a ROFR. If it does, inform your buyer early — a buyer who discovers the ROFR in week three of a 45-day exclusivity period is a buyer with a timeline problem. Most sale-leaseback buyers are familiar with franchise ROFRs and can accommodate the timeline. Surprises are the problem.
2. Consent to sale of real property
Separate from ROFR, many franchise agreements require the franchisor's written consent before the franchisee can sell real property associated with a franchised location. The consent requirement is typically tied to the transfer provisions of the agreement.
The practical distinction between ROFR and consent:
- ROFR: Franchisor can buy the property themselves
- Consent: Franchisor approves (or denies) the sale to a third party
A consent requirement without ROFR is generally less disruptive — if the franchisor routinely approves real property sales (which most do, since the franchisee remains in the location as tenant), the consent is a formality that adds administrative time but not structural risk.
What to do: Pull the consent provision and determine what the franchisor needs to see to grant approval. Typically: the buyer's identity, the purchase price, and the proposed lease terms. Having this documentation ready at the time of the consent request accelerates the approval.
3. Lease approval requirements
Some franchise agreements require the franchisor to approve any lease entered into by the franchisee for the licensed premises. In a sale-leaseback, you're executing a NNN lease that becomes your occupancy document for the next 20 years.
If your franchise agreement contains a lease approval requirement, the NNN lease that results from your SLB will need franchisor approval before or at closing. The approval process typically involves the franchisor's real estate or legal team reviewing:
- The permitted use definition (does it accurately describe the franchised business?)
- The lease term (does it align with or exceed the remaining franchise agreement term?)
- The assignment provisions (can the lease be assigned in connection with a franchise transfer?)
- The default cure rights (does the franchisor have the right to cure a tenant default to protect their position?)
What to do: Disclose the lease approval requirement to your SLB buyer early. Request a copy of the franchisor's standard lease review checklist if one exists — some franchise systems have published requirements for third-party leases. Draft the permitted use and assignment language in the NNN lease with the franchise agreement's requirements in mind from the start.
4. Franchise term vs. lease term alignment
This is a structural issue, not a consent issue. Your NNN lease will run 20 years. Your franchise agreement may have 10 years remaining on its current term. The gap matters.
If your franchise agreement expires in year 12 of a 20-year lease and you do not renew it, you'll have a lease obligation for 8 years in a space you can no longer operate as your franchised concept. The business may pivot to an alternative use that fits the space — or it may not.
What buyers look at: Most sale-leaseback buyers want the franchise agreement term to cover a meaningful portion of the initial lease term — ideally with renewal options that could extend the franchise agreement through the full lease primary term. An operator with 20 years left on their franchise agreement (or with renewable rights that extend beyond the lease term) presents a cleaner credit picture than one whose franchise agreement expires in year 8.
What to do: Review your franchise agreement expiration and renewal option terms before your first SLB conversation. If you have renewal options, document them. If your agreement is approaching expiration, consider renewing it before the SLB closes — a renewed franchise agreement with a full term is a better credit picture than one with 8 years remaining.
5. Transfer fees on business sale (downstream)
This doesn't affect the SLB closing — but it affects the downstream transaction if you eventually sell your business. Most franchise agreements require a transfer fee when a franchisee sells their business to a new franchisee. That transfer triggers the new operator to assume the NNN lease.
Buyers of your business will model the transfer fee into their acquisition cost. If the transfer fee is substantial relative to the business's value, it affects the business's eventual sale price. Worth knowing, even if it doesn't affect today's SLB decision.
Before you call a sale-leaseback buyer
Get your franchise agreement in front of a franchise attorney and ask for a one-page summary of: ROFR provisions, consent-to-sale requirements, lease approval requirements, franchise term remaining and renewal options. That one page will tell a sale-leaseback buyer everything they need to know about the franchise layer on your deal — and will save everyone involved 2-3 weeks of discovery that would otherwise happen mid-diligence.
Franchise operator preparing for a sale-leaseback conversation? We've worked through franchise agreement provisions across QSR, healthcare, fitness, and specialty retail systems. If you want a quick read on how your agreement affects the process, we can cover it on an introductory call.