Tweet

Reselling Your Franchise

Written by: Sebastien Page

Article Overview: 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.

Reselling Your Franchise

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.

Related Articles
  Finding a Franchise
  Franchise Agreement: Terms on a Franchise Resale
  Australian Franchise Directory Challenges Decrease in Franchise Enquiries
  How Can You Get Out of a Franchise?
  Franchising with all its Success

Article Tags: asking price, assets, brand name, business model, cash flow, franchise costs, franchisee, franchisor, good chance, harder time, independent business, money, profitability, royalties, unprofitable business



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Mistakes Made by New or Inexperienced Sales Staff

Common Sense Stress Management

Looking for an Easy Online Business Opportunity?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.