Shareholders agreement for a franchisee company

A franchisee company is owned by its shareholders and controlled, in most of the ways that matter, by the franchisor: the franchise agreement decides who may own the company, who may run it, what it may do, and what happens when a shareholder wants to sell. A shareholders' agreement for a franchisee has to be written inside those constraints, dividing the owners' roles and money, recording the guarantees the franchisor and the landlord took, and providing for a shareholder's exit in a way the franchisor will approve. For a fixed fee of £995, delivered in five working days, I draft the agreement for the owners jointly, beginning with a briefing session and ending with a note on how the articles need to work with it.

Who this is for

Owners in England and Wales of companies holding a franchise for a food, retail, service, fitness or other format, from two partners who bought one territory to a family running several units.

What matters in a franchisee company's shareholders' agreement

The franchise agreement that sits above the shareholders

The franchise agreement will require the franchisor's approval of the company's shareholders and directors, restrict transfers of shares and changes of control, name an approved operator who must run the business, impose the system's standards, fees and reporting, and give the franchisor termination rights on the company's breach or insolvency, and the shareholders' agreement should be drafted with it in front of it, say that the franchise agreement prevails as between the company and the franchisor, and make compliance with it an obligation of every shareholder; an agreement between the owners that the franchisor would treat as a breach is worse than none.

The franchisor's consent to transfers and changes of control

The agreement's transfer provisions (pre-emption, leaver provisions, drag-along, options) should be subject to the franchisor's consent where the franchise agreement requires it, with the shareholders obliged to seek consent and the transfer conditional on it, and should address the franchisor's own rights (a right of first refusal over the business or the shares, a transfer fee, training of a new operator) so that the owners' deal and the franchisor's rights do not collide; a leaver provision that produces a transfer the franchisor will not approve leaves the leaver as a shareholder, and the agreement should say what then happens.

The approved operator

Franchisors approve an individual to run the unit, and the agreement should record which owner that is, their obligation to remain in the role and to meet the franchisor's training and standards, what happens if they leave or the franchisor withdraws approval (the other owners must find and have approved a replacement, or the franchise is at risk), and how they are paid for running it (a salary under a service agreement) as distinct from the dividends all owners receive under a policy within section 830 of the Companies Act 2006; an operator who is also a shareholder has two roles, and the agreement should keep them apart.

Personal guarantees to the franchisor and the landlord

Franchisors take personal guarantees from the shareholders of a franchisee company for the franchise fees and obligations, and landlords take them for the lease, and the agreement should record each guarantee, provide for contribution between the owners in proportion to their shares, require the company and the other owners to indemnify a guarantor beyond their share, and provide for release or replacement when a guarantor sells, which the franchisor and the landlord must agree to; an owner who sells their shares but remains on the franchisor's guarantee has sold the upside and kept the risk.

Pay, dividends and the franchise fees

The agreement should set the financial controls (banking, authorisation limits, monthly accounts), the dividend policy operating after the franchise fees, marketing contributions and the lease are paid and the reserve the franchisor expects is kept, the process for the operator's salary, and the owners' agreement on borrowing for refits the franchisor requires; a franchisee's cash is spoken for before the owners see it, and the policy should start from what is left.

Departures, renewal and resale

The agreement, with matching articles, should require an owner who leaves to offer their shares to the others at a stated valuation (franchised businesses are often valued on a multiple the franchisor's market supports), with good and bad leaver terms, the franchisor's consent obtained, and the leaver released from guarantees; it should say how the owners decide whether to renew the franchise at the end of the term, to buy further territories, or to sell the business, with drag-along and tag-along for a sale and the franchisor's rights on resale observed; the note on the articles says what must go into them, since only the articles bind every shareholder under section 33 of the Companies Act 2006 and the franchisor's requirements.

What it costs

Shareholders agreement, £995. An agreement between the shareholders of a private company, with a note on how it interacts with your articles. Five working days.

Buying online forms the engagement on payment. The scope is what the shareholders agreement page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A briefing session with all shareholders together, to work through the questions people avoid asking each other
• A shareholders agreement drafted for your actual situation rather than a precedent with the names changed
• A note on how the agreement interacts with your articles, and whether the articles need amending to make it work
• A plain English explanation of every material choice, so nobody signs something they have not understood
• One round of amendments
• Signature-ready documents

What is not included

• Acting for individual shareholders separately, because I act for you jointly
• Company valuation
• Tax structuring, which needs your accountant and should run alongside this
• Amended articles of association and IP assignments, which I quote separately
• Filing at Companies House
• Resolving a dispute that has already started

Questions I am often asked

Can my co-owner sell their shares to someone else?

Only with the franchisor's consent, which the franchise agreement will require, and subject to the pre-emption rights the agreement gives you. The agreement makes any transfer conditional on both.

The franchisor approved me as the operator. What if I want to step back?

The agreement requires the owners to find and have approved a replacement operator, and says what happens to your shares and your role. Stepping back without an approved replacement puts the franchise at risk, which the agreement is drafted to prevent.

I guaranteed the franchise agreement. Will selling my shares release me?

Not without the franchisor's agreement. The shareholders' agreement requires the company and the other owners to indemnify you and to seek your release; the franchisor decides whether to give it.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Reviewing a franchise agreement before you sign
• Shareholders agreement for a restaurant or bar

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.