Tweet

How To Sell Your Franchise

Guest post by: Ed Teixeira

Article Overview: Its been estimated that franchisees put their business up for sale within 5 years of ownership. Learn about the important steps you'll need to take before listing your franchise for sale.

How To Sell Your Franchise

If you're like most franchisees owners there will be a time when you decide to sell your franchise.

This decision will be based upon one or more of the following reasons:

1. You suffer "burnout." The average life span of a small business is four years.

2. Operating the franchise is no longer enjoyable.

3. The value of the business is at a high level.

4. Competitive factors threaten your sales.

5. There are extenuating circumstances, such as a personal or family illness.

Unlike independent business owners, franchisees have restrictions regarding the sale of their franchise. Because the franchise can only be sold as a franchise can limit potential buyers. This makes it important that your franchise is attractive to qualified buyers.

The Majority of Franchisor's Don't Assist in the Franchisee Sales Process

Since franchisors retain strong contractual rights regarding the sale and assignment of a franchise, most franchisors take an "arms length" approach, when it comes to franchise resales. This lowers the risk that the franchisor will face claims of interfering with, or inhibiting the right of a franchisee to sell their business. Without an organized franchise resale program most franchisees must shoulder the responsibility to find a qualified buyer and complete the transaction. When you're ready to sell be sure to notify your franchisor since they will be involved in various stages of the sales process. They may also have a franchise prospect in their database that expressed an interest in your territory.

Finding Buyers for your Franchise

If you decide to engage the services of a business broker expect to pay a commission of 8 to 12% of the sales prices. Most reputable business brokers will also have a minimum transaction fee of a least $10,000. Some franchisors will provide the name of business broker(s) to their franchisees. However, as a franchisee looking to sell, it will be your responsibility to find and contract with a business broker.

If you decide to find buyers, begin by listing your franchise on several Internet sites. A number of highly visited sites are bizbuysell.com, bizquest.com, businessnation.com. These sites are inexpensive and attract a great deal of traffic.

Use These Items as a Checklist before Listing your Franchise

• Confirm if there will be a change in the royalty, advertising fees or other important items once the sale is completed. Since franchisors usually require a buyer to execute the current form of franchise agreement, there may be new terms that can negatively impact the future profitability and sales price of the franchise.

• Advise and utilize the services of your accountant and attorney. You'll need their expertise in valuing the business and dealing with any potential legal issues.

• If location is a key component of your franchise the terms of your lease can be a positive or negative factor depending upon the length and rent. Obviously a long term lease in a good location at a reasonable rent is a plus, while the converse can be a negative. Identify options with your landlord.

• Changes in the competitive nature of the franchise can have an impact. Be prepared to answer questions regarding competition.

• Will the franchisor require the new franchisee to remodel the premises? Some franchise concepts, especially in the food segment will require the buyer to bring the premises up to current standards. Once again identify the possible requirements placed upon a new franchisee.

• Be in "good-standing" with your franchisor. A franchisee in default of their franchise agreement that attempts to sell their franchise without an understanding from the franchisor could get into a "sticky" situation. If necessary, obtain advice and assistance from your franchise attorney.

• Have good financial records that are current and accurate. The majority of small business sales fail because the financial statements fail to confirm owner income, operating expenses and future earnings potential.

• Be realistic and honest regarding the value of your franchise business. Most franchise owners tend to err on the side of setting a higher sales price than their financials support. Also, don't rule out financing part of the sale price. If you do provide financing be sure your attorney includes protection in your sales agreement.

Selling your franchise is an important decision and requires careful preparation before listing for sale. Make sure you obtain the advice of professionals before and during this important activity.

Related Articles
  Reselling Your Franchise
  How do I sell My Restaurant Franchise?
  Master Franchises Explained
  Franchise Agreements The Basics
  Franchising with all its Success
  Question Your Franchise Decision Making
  Selling Your Franchise: What Are Your Rights?
  About 60% of all franchise opportunities have less than 50 units.
  Why Use a Franchise Consultant?
  Did you know: NIIT Franchise was present in Malaysia in 1997?
  What is Franchising
  Looking for Franchise Finance? You May Be Sitting On It Already
  Selling a Franchise How to
  Things to Look for In a Coffee Franchise
  What to do before Selecting a Franchise System
  Do You Have the Right Stuff to be a Franchise Owner
  Franchises Versus Licensed Business Opportunities
  "Untouchables" and "Discussables"
  Franchise Resales
  Factors That Affect a Good Franchise Site Location

Article Tags: franchise, franchise for sale, franchisees, selling your franchise



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.

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

What Makes an Extraordinary Business Consultant?

Fighting the Saw-Tooth Affect

The Pure FUN of Learning & Using NLP

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.