If you are thinking about re-selling your franchise to a new franchisee, for whatever reason, how is that done? You might be wondering how it differs from selling an independent business, because you don’t technically own the franchise, you only own its assets. You are renting everything else, from the brand name to the business model of the franchisor.
When a franchisee wants to re-sell his or her franchise, he or she probably wants to get all of the money they have invested in the business, and more, if possible. You may be wondering what the price is based on. It is a multiple of the cash flow of your existing business. If your franchise is profitable and has a track record, there is a good chance you will be able to make money by selling it, based on the money you have invested in it.
In addition, the fact that you are selling a franchise rather than an independent business makes it more likely that you will make a profit on the sale, because the buyer is getting other benefits besides the profitability of the business itself, including the brand name which draws in customers and the opportunity to use the services of the franchisor, though, of course, they will have to pay royalties for those things just as you did when you owned the franchise. The buyer will be drawn to your franchise because you have done all of the hard work getting it started and they can reap the benefits of working with the franchisor’s business model.
If your franchise is not yet profitable, you may have a harder time selling it to a buyer, even if they are drawn to the franchise model. Some buyers may not particularly care that the business you are selling is a franchise, and will just see an unprofitable business and move on. Other buyers may still be interested, but you will probably have to lower your asking price if you are determined to sell your franchise. If you are asking more money than a new franchise costs, the buyer may not be interested in buying your unprofitable franchise. They will have to consider whether or not certain aspects of your franchise are more appealing to them than buying a new franchise. For example, you may be able to sell your franchise at a higher price than a new franchise if your territory is particularly desirable, if you’ve done a lot of work to get things going and have just not quite broken even yet, or if you’ve done marketing to help get customers interested in your territory already. These things will add value to your franchise in the mind of the buyer, even if it is not yet profitable, and you may be able to sell it for more than you bought it for. However, if you are very determined to sell your franchise quickly, you will probably need to lower your price even more than the cost of a new franchise.
Reselling Your Franchise - To learn more about this author, visit Sebastien Page's Website.
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Anne Barr
Anne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations,
networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business
ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Sebastien Page
(Visit Sebastien's Website)
Sebas
tien Page is Director of Marketing for
Wo
rldFranchising.com, the most
comprehensive information resource for
potential franchise buyers. The company
also publishes franchise best sellers such
as Bond's Franchise Guide, and Top 100
Franchises Guide. Before joining
WorldFranchising.com, Page was Marketing
Manager for Franchise.com where he
successfully led the Marketing Department.
Sebastien Page is very active in the
franchise community and he often writes
about franchising, sales and marketing.
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