Sarah is a content and copy writer with a background in merchant banking. She has a passion for putting technical language into plain English and is a contributing writer for Sprintlaw.
Transferring a franchise can feel a bit like selling a business and applying for a new job at the same time.
You’ve got a buyer lined up (or you’re thinking about becoming the buyer), you’re negotiating price, and then someone mentions the “transfer fee” - and suddenly you’re wondering what you’re actually up for.
This guide is current and reflects how franchise transfers are typically handled in New Zealand right now, including the fees franchisors commonly charge and the other costs that tend to pop up during a franchise sale.
Let’s break down what franchise transfer fees usually are, what they cover, who pays them, and how you can reduce nasty surprises before you sign anything.
What Is A Franchise Transfer And Why Are There Fees?
A franchise transfer (often called an “assignment” of the franchise agreement) is when the existing franchisee sells their franchise business to a new operator, and the franchisor agrees to the new operator taking over the franchise rights.
This isn’t the same as selling an ordinary independent small business. In a franchise, you’re operating under someone else’s brand and system, and you’re usually bound by a franchise agreement that says you can’t transfer without the franchisor’s written consent.
That consent process is exactly where transfer fees come in.
Why Do Franchisors Charge Transfer Fees?
From a practical point of view, the franchisor usually has to do work to approve the incoming franchisee and manage the handover. Transfer fees are commonly designed to cover things like:
- reviewing the buyer’s application and financials
- interviewing the buyer and assessing suitability
- updating franchise records and onboarding systems
- preparing transfer documents and compliance checklists
- training the incoming franchisee (sometimes included, sometimes extra)
- site inspections or operational audits before transfer
It’s also worth knowing that some franchisors use the transfer process to “reset” certain commercial terms (for example, moving the buyer onto the franchisor’s current standard agreement or updated manual requirements).
Where Are Transfer Fees Written Down?
Most of the time, franchise transfer fees will be set out in:
- the franchise agreement (often in the “assignment” / “transfer” / “consent” clause)
- the franchisor’s disclosure documents (if they provide them)
- the franchisor’s transfer policy or operations manual
- the sale and transfer paperwork you sign at settlement
In New Zealand, franchising is not governed by a single mandatory franchising code in the same way as some other countries. However, many franchisors follow industry standards (including voluntary codes), and regardless, general NZ laws around contracts and misleading conduct still apply - including obligations under the Fair Trading Act 1986.
What Transfer Fees Will I Pay When Transferring A Franchise?
There isn’t one universal number for a franchise transfer fee in NZ. The amount (and what it covers) depends heavily on the franchise system, the industry, and how “hands on” the franchisor is during onboarding.
That said, transfer fees usually fall into a few recognisable buckets.
1. Franchisor Transfer (Assignment) Fee
This is the classic “transfer fee” people mean. It’s the amount the franchisor charges to process the transfer and give consent.
It might be:
- a fixed amount stated in the franchise agreement (e.g. $X + GST)
- a range or “reasonable fee” that can vary depending on the circumstances
- a fee linked to the franchisor’s legal costs (e.g. “franchisor’s legal fees + admin costs”)
- a combination of fixed admin fee plus legal fees
Watch-outs: If the agreement says the fee is “reasonable” or “as determined by the franchisor”, you’ll want clarity early on. “Reasonable” can still be expensive if the franchisor involves external lawyers, extended training, or multiple site visits.
2. Training Fees (Sometimes Separate)
Some franchisors include initial transfer training within the transfer fee. Others charge separately for:
- initial training courses
- refresher training for the incoming franchisee’s manager
- training for new staff
- in-person training at the site (especially if travel is involved)
Training fees may also increase if the franchisor requires the buyer to complete training before settlement.
3. Documentation / Legal Fees Charged By The Franchisor
It’s common for franchise agreements to require the seller (and sometimes the buyer) to pay the franchisor’s legal costs for preparing transfer documents.
These might include:
- deeds of assignment / transfer documents
- guarantees (if required)
- updated confidentiality documents
- new franchise agreements (if the buyer must sign the current version)
If you’re unsure what you’re committing to, it can be worth having a lawyer review the process and documents early - including a Franchise Agreement Review so you know which fees are locked in versus negotiable.
4. “Upgrade” Or Refit Costs Triggered By Transfer
Not always called a “transfer fee”, but just as important: some franchisors require you to bring the premises and fit-out up to the current brand standard as a condition of approving the transfer.
This can include:
- new signage
- new uniforms
- equipment upgrades
- software/POS upgrades
- refurbishment or repainting
Sometimes this is reasonable and planned. Sometimes it’s a nasty surprise that changes whether the buyer can afford the deal.
5. Renewal Or “New Agreement” Fees
If the buyer is required to enter a fresh term (or sign a new form of franchise agreement), the franchisor may charge fees similar to an initial franchise fee, or charge a “renewal fee”.
This is more likely where:
- the seller’s agreement is close to expiry
- the franchisor does not permit assignment of the old agreement
- the buyer is treated as effectively “starting fresh”
Practically, this can shift the economics of the deal. If you’re the seller, you’ll want to understand whether the buyer’s total entry cost is becoming too high (which can reduce what they’re willing to pay you for goodwill).
Who Pays The Transfer Fee (Seller, Buyer Or Both)?
There’s no single rule here - it’s a mix of what the franchise agreement requires and what the parties negotiate in the sale contract.
What The Franchise Agreement Usually Says
Many franchise agreements state that the franchisee (the seller) must pay the franchisor’s costs for the transfer approval process. That might include:
- the transfer/assignment fee
- the franchisor’s legal costs
- any costs of inspections or audits
However, the buyer often ends up paying for items that are “about them”, such as training or onboarding.
What Happens In Real Deals
In practice, you’ll commonly see arrangements like:
- Seller pays: franchisor transfer fee + franchisor legal costs (because the seller is the one asking for consent to sell).
- Buyer pays: training + onboarding + any new hardware/software + their own legal review costs.
- Split: parties share transfer fee or adjust purchase price to account for the fee.
The key is making sure it’s clearly written into the sale documentation so there’s no argument right before settlement.
For many franchise transfers, it’s worth documenting the commercial deal properly using a tailored Franchise Sale Agreement, so the “who pays what” question is settled upfront rather than fought over later.
What Other Costs Come With A Franchise Transfer?
Transfer fees are only one piece of the puzzle. A franchise transfer is usually a bundle of approvals, contracts, and third-party consents - and each can carry its own cost.
Legal Fees (Buyer And Seller)
Even if the franchisor uses “standard” documents, you should still get the legal side checked for your specific situation. A transfer can affect:
- your personal liability under guarantees and indemnities
- restraint of trade obligations
- what happens if the franchisor terminates after settlement
- handover obligations (stock, customer data, training time, marketing accounts)
- whether assets are included or excluded
Depending on the deal structure, you might also need a Legal Due Diligence process (especially if you’re the buyer and you want to confirm the franchise is actually in good standing, financially and contractually).
Landlord Consent And Lease Transfer Costs
If the franchise operates from leased premises, the lease is often one of the biggest “hidden” components of the transfer.
You may need:
- landlord consent to transfer/assign the lease to the buyer
- a formal lease assignment document
- confirmation of bond, bank guarantees, or security
- updated insurance certificates
It’s very common for the buyer to need advice on the lease, including a Commercial Lease Review, because rent, renewals, and permitted use can make or break the franchise’s profitability.
The paperwork is also important - if a lease is being assigned, a Deed Of Assignment Of Lease is often the key document that records the transfer and ongoing responsibilities.
Franchisor “Clean-Up” Requirements
Before a franchisor approves a transfer, they may require the outgoing franchisee to fix compliance issues. For example:
- paying outstanding fees and royalties
- updating overdue reporting
- rectifying brand standard issues
- settling supplier accounts that are tied to the franchise system
If you’re selling, you’ll want to identify these early. Leaving it until the last week can delay settlement or give the buyer a reason to renegotiate.
Employee-Related Costs
Depending on how the sale is structured, employees might be offered roles by the buyer, or the seller may need to handle terminations and final pay.
Even when staff “move across”, there are still practical questions to work through (like accrued leave, payroll cutover, and who is responsible for what).
For the buyer, you’ll also want to ensure you’re issuing the right documents if you’re taking on staff - including an Employment Contract that matches the role and your business setup.
Marketing And Data Transfer (Privacy Compliance)
Many franchises have customer databases, booking systems, mailing lists, and loyalty programs.
If customer data is being transferred as part of the sale, you’ll need to think about your obligations under the Privacy Act 2020. Practically, that means being careful about:
- what customer data is included in the sale
- whether customers have been told their data may be transferred
- who has access to logins and systems pre- and post-settlement
- how data is securely handed over
This is one of those areas where doing things properly upfront saves a lot of stress later - especially if customers complain or there’s a data breach.
How Do You Reduce Surprises And Negotiate Transfer Fees?
You can’t always “negotiate away” franchisor transfer fees (many are fixed), but you can almost always reduce surprises and protect yourself with good process and good paperwork.
1. Ask For The Fee Schedule Early
Don’t wait until you’re emotionally committed to the deal.
As soon as a sale becomes realistic, ask the franchisor (in writing) for a breakdown of expected transfer costs, including:
- the base transfer fee (and whether GST applies)
- estimated legal/document fees
- training requirements and costs
- any required upgrades/refit obligations
- expected timeframe for approval
Getting this upfront helps you price the deal correctly and avoid last-minute settlement delays.
2. Check Whether The Buyer Must Sign A New Franchise Agreement
This is one of the biggest commercial “swing factors”. If the buyer has to sign a new agreement, you’ll want to confirm:
- the term length and renewal rights
- any changes in royalty, marketing levy, or tech fees
- any new restraints (for the buyer and potentially for the seller too)
- what happens if the franchisor declines consent (and whether the buyer gets their deposit back)
If documents like guarantees, deeds, or acknowledgements are being used to bring someone into an existing contract structure, a Deed Of Accession may be part of the process - and it’s important to understand exactly what obligations are being “joined”.
3. Build A Transfer Cost Clause Into The Sale Contract
Whether you’re the buyer or seller, you want the sale agreement to clearly cover:
- which party pays the franchisor transfer fee
- which party pays franchisor legal costs
- who pays training costs
- what happens if the franchisor requires upgrades
- what happens if consent is delayed or refused
- how refunds/deposits work if the deal falls over
Even where a deal is “friendly”, it’s much easier to keep it friendly when the contract is clear.
4. Treat Due Diligence As Non-Negotiable (Especially For Buyers)
If you’re buying, you’re not just buying equipment and a customer base - you’re buying into an ongoing system with ongoing fees, strict rules, and real termination risk if you get it wrong.
A solid due diligence process often includes:
- reviewing the franchise agreement, manual obligations, and fee structure
- checking whether the seller is in breach (and whether breaches must be fixed pre-settlement)
- reviewing financial performance and any unusual one-off costs
- reviewing the lease and ensuring the permitted use matches the franchise model
- understanding staff liabilities and transition plan
This is where legal support can pay for itself, because it’s much cheaper to identify a problem before settlement than to fight about it afterwards.
5. Make Sure Advertising And Claims Are Accurate
If the seller (or a broker) is making claims about revenue, profit, or “guaranteed returns”, those statements can create real legal risk if they’re misleading.
That’s why both buyers and sellers should be careful about what is said in writing, and keep claims grounded in evidence (and appropriate disclaimers). The Fair Trading Act 1986 can apply where representations are misleading or deceptive, even if nobody intended to mislead.
Key Takeaways
- Franchise transfer fees are usually charged by the franchisor to cover the work involved in approving the buyer and documenting the handover, and they’re often set out in the franchise agreement.
- Common transfer-related costs include a franchisor assignment fee, franchisor legal/document fees, training costs, and sometimes mandatory upgrades or refurbishment costs triggered by the transfer.
- Who pays transfer fees depends on the franchise agreement and the deal you negotiate - but it must be clearly documented in the sale contract to avoid disputes right before settlement.
- Lease-related costs (including landlord consent and lease assignment documents) are often a major part of a franchise transfer and can affect whether the business is viable for the buyer.
- Buyers should treat legal due diligence as essential, because you’re stepping into an ongoing system of obligations, fees, and termination risk - not just buying assets.
- It’s smart to confirm transfer fees and requirements early (in writing) so you can price the deal accurately and avoid settlement delays.
If you’d like help transferring a franchise (as a buyer or a seller), our team can guide you through the documents, franchisor consent process, and the “who pays what” details. You can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
