When a Private Equity Firm Buys Your Franchisor: Questions a Franchise Law Attorney Asks about Your Contract

A private equity buyout changes who owns your franchisor. A franchise law attorney checks your signed agreement and the next FDD for changes that could reach your unit.

Main Takeaways:

A sale of the franchisor does not rewrite the agreement you signed.
Item 17(j) shows whether the franchisor can assign your contract.
New fees added through manual updates deserve a close look.
A franchise law attorney can compare a renewal form with your original agreement.

The email usually lands on an ordinary weekday. Your franchisor has a new owner, a private equity firm, and the message promises growth and fresh support for every location. Many franchisees read it twice and still feel a little unsure about what will change for them. Some forward it to a business partner, and a few file it away and wait for the next memo. Nothing in the email says much about fees, at least not yet. The fee terms sit in the contract you already signed, and a franchise law attorney starts right there.

Deals like this are hardly rare now. FRANdata figures cited by The New York Times show 52 franchise brands bought by private equity firms and other investors in 2019. By 2021, that number had reached 149. A franchise law attorney reviewing a franchisor sale will likely raise the questions below. Not all of them may apply to your situation.

Finding Out Who Holds Your Franchise Agreement Now

Reading the Assignment Clause: Item 17(j) of the Franchise Disclosure Document, or FDD, summarizes the franchisor’s right to assign your contract. Some agreements allow it without your consent. In many buyouts, the investor buys the franchisor company itself, and the party named in your contract stays the same. Owners still go looking for that clause, a bit late.

Checking the Next FDD for Sister Brands: Item 1 has to name the franchisor’s parents and any affiliates that sell franchises or supply franchisees. After a buyout, that list can grow longer. Item 12 asks about affiliates running a similar business under a different trademark. Would a sister brand two miles away chase the same customers? It might.

Checking Franchise Fees and Supplier Rules after the Sale

Watching the Operations Manual for New Fees: In July 2024, the FTC listed private equity takeovers among the most common concerns franchisees had raised with it. Unilateral changes to operating manuals made that list too. FTC staff took the view that fees never disclosed in the FDD may break the law, even when added through a manual update.

Asking Who Earns Money from Required Purchases: Item 8 asks whether the franchisor or its affiliates earn revenue from purchases franchisees must make. A new owner might steer a supply contract or two toward its other portfolio companies. Here is why it matters: comparing this year’s Item 8 with last year’s can show small shifts early.

Next steps for your own records:

Any fee in a new memo that never appeared in Item 6.
The current approved supplier list.
Requests to sign anything new, even a routine bank debit form.
Whether the agreement you signed caps fee increases, a detail some owners never checked.

Getting a Franchise Law Attorney to Compare Renewal Terms

Comparing the Renewal Form: Item 17(c) has to explain what renewal means in that system, including whether franchisees may be asked to sign materially different terms. A new owner might rewrite that form completely. A franchise law attorney can put the renewal draft beside the agreement you signed years ago, before you commit to anything.

Keeping Up with Franchise Law after a Franchisor Sale

Investors who buy a brand once may well sell it again within a few years. Keep each new FDD in one folder and read it when it arrives. Following franchise updates from the FTC and your state franchise office helps, too. Before signing anything new, it’s sensible to review it with a franchise law attorney.