Proceeds of Sale of Regional Business

Excerpt from the Regional Franchise Agreement

The National Franchisor must hold the gross sale price on trust for 7 days, after which it will be distributed as follows:

 (a) 20% commission to the National Franchisor.

 (b) Any money owing to the National Franchisor or a third party will be deducted accordingly, and the balance returned to the vendor, apart from the 20% commission of the purchase price.

 (c) The remainder will be returned to the Regional Franchisor after a further 38 days, except that the sale price will be reduced in proportion to any Franchisees in the Region who surrender or announce their intention to surrender, unless such intention was made clear in the sale of              business agreement. This reduction will be returned to the purchaser. 

 For example: if there are 20 Franchisees in the Region and within 45 days of the commencement date of the Purchaser Franchisor’s new regional franchise agreement, two Franchisees surrender or announce their intention to surrender, the gross sale price will be reduced by 2/20th or 10%. However, if one of these was reported as intending to surrender in the sale document, the reduction will be only 5%.