franchise

5 Considerations Before Selling Your Franchise Business

There are many advantages to owning a franchise, from capitalizing on an existing brand to have an established business formula already in place. However, despite these perks, there may come a time when you decide the time is right to sell your franchise. Whether you see an opportunity to receive top dollar for your store or are simply bogged down by the responsibilities of being a business owner, the following breakdown looks at 5 important considerations for how to sell a franchise.

Know That the Decision to Sell May Not Rest With You

As a franchisee, the franchisor cannot force you to retain ownership of your business. However, they may prohibit you from selling to the first buyer that comes along.

Franchises typically have a very specific set of requirements for prospective buyers. The minimum initial investment for purchasing a store, and the percentage of this investment required as a cash down payment. 

No matter how much you like a potential buyer if the candidate does not meet the minimum purchasing requirements of the franchisor, your sale will not be approved. Because of this, it is important to work with an experienced business broker when selling your franchise. A business broker will vet the quality of the candidate before you waste your time on a sale.

Create a Compelling Case for Your Store

One of the benefits of selling a franchise is that the purchasers likely have extensive experience with your brand. They have done business as a customer, seen advertisements on the media, and driven past various locations throughout the country.

As a result, spending time trying to educate buyers on the particulars of your company is not needed. They know what you do and have seen the potential. They have done their research on your company. When they inquire about buying your location, it can be counterproductive to provide information that they already know.

A better approach is to create a sense of intimacy that is unique to your store. Highlight why a buyer should take pride in owning your particular location. Use robust social media pages to demonstrate how your business is making a difference in the local community. Prove that although the benefits of inheriting an established national brand are real, your store is more than a cookie-cutter corporate spinoff and has the ability to connect with clients on a human level.

Understand That Closing May Take a While

If you are in a rush to reinvest the funds from the sale of your franchise, you might want to slow down. Just as the franchisor must approve the buyer, there are steps that approved buyers must complete before the sale is finalized. For example, some franchises require that a buyer complete a training program to ensure that he or she will be able to run the business in a manner consistent with the corporate brand. It is not uncommon to wait up to 20 weeks after locating a buyer to finalize the sale of the franchise.

Don’t Sell to the First Buyer That Crosses Your Path

Given the increased restrictions for selling a franchise, it may be tempting to sell to the first qualified buyer. However, understand that the pool of buyers for an existing franchise is larger than that for a private-label business. In many cases, there will be a number of existing franchisees looking to operate additional locations. As these types of experienced buyers have likely paid off most of their debt and optimized profits at their current locations, they will be in a strong position to multiply their profits by operating additional stores and may be willing to pay a premium for your location.

Leverage the Success of Other Franchisees

When working with a business broker, take steps for how to value a business and arrived at a figure for what your location is worth. This includes financial statements, an appraisal of how much capital assets the business has, and how well the store is positioned to capitalize on future growth.

One benefit unique to franchise businesses is that there are dozens of other stores with which to provide apples-to-apples comparisons. If there is a franchise that has become a millionaire from its relationship with the brand, don’t be afraid to leverage that when setting the price for your location.

Consider All Your Options Before Selling

Selling a franchise business carries a special set of considerations. Knowing that the franchisor must approve the buyer, creating a compelling case for your location, being patient during the closing process, casting a wide net for prospective buyers, and leveraging the success of other franchises are 5 important points to keep in mind when selling your franchise. 



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