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The franchise resale option

Written by: Diarmuid Kieran

Article Overview: When a franchisee decides to sell his business.

The franchise resale option

As many more franchise companies are becoming established, franchise resales are now common in the industry.

This is where a franchisee sells an existing franchise to someone who will take it over and if the process is managed correctly, both buyer and seller stand to benefit.

Sellers will need to ensure that the franchise is in good shape before putting it on the market. At the very least it needs to be well run and have some positive monthly sales figures to attract a buyer.

Franchisees wanting to offload their business must then decide how to go about it. Private advertising in the local media or online can be useful as long as they know that it will reach people who have the necessary finance and experience to be accepted by the franchiser.

This is because there is the danger that the sale could take longer than wanted if there is a lack of interest or people responding are not deemed to be suitable by the franchiser.

The other option is to go to the franchiser to help find a buyer, as many of them will have a database of people interested in buying a franchise with most or all of the right credentials.

However, franchisees need to bear in mind that most franchiser will take a percentage of the sale if they introduce the buyer.

When it gets to the stage where the seller and prospective buyer meet to discuss the sale, it is important that franchisees receive advice from an accountant on what price would be value for money so they can move on with the amount they deserve.

Similarly, those that want to buy existing franchises should get professional help to assess the value of the business, with turnover, expenses and assets among the items that will be looked at, so that they do not pay too much.

Buyers will benefit from the franchise already being established with staff and equipment in place and having a knowledge of customer trends and how successful marketing campaigns and special offers have been.

However, they still need to carry out substantial research to ensure that the franchise is a wise investment, even if the financial figures look good.

To try to avoid problems with the franchiser, buyers should talk to the selling franchisee about how helpful or problematic the franchiser is.

They should also find out why the owner wants to move on, as it could be partly or fully influenced by market forces such as a new road development which will reduce people going to an outlet or the arrival of a big brand competitor in the same street.

Buyers should not be put off though if the franchise has not made as much profit as it expected to. If they discover through market research that there is still a big demand in the area for company's products and/or services, then it could be that a change of approach is needed to improve sales and reduce expenditure.

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