As a franchise owner, you’ve spent years building your business, and perhaps now you’re ready to move on to something else — starting another company, working part-time, or even retiring. You know many things about business, but nothing about how to sell a franchise. Here, then, are some key considerations when selling a franchise business.
Review the Franchise Agreement and Financials
When you are ready to sell a franchise, read your franchise agreement carefully to make sure you understand any requirements for and restrictions on selling the business, including whether the franchisor has first right of refusal to repurchase the franchise from you. Work with your accountant to produce up-to-date financial reports that accurately disclose the true financial health of the business. And make sure you fully estimate all expenses you will incur in order to sell the franchise, including any tax liability.
Consider Both External and Internal Buyers
When thinking of selling your franchise, consider both external buyers and those currently working in the business, such as a manager or key employee. An internal buyer should already understand the business and the expected standards of conduct, especially if that person is part of your succession plan.
Choose to Hire Help or Do It Yourself
Selling a franchise business is a complex task, made even more so when you are simultaneously running the business. For this reason, you may choose to hire a broker, or completely outsource the entire process. If you have already begun to implement your exit plan, however, and have the time, you may decide to handle most aspects of the sale yourself.
- Broker: A broker who is experienced in working with franchises, perhaps even the same franchise brand you are selling, is more likely to know the industry and the players and can bring you qualified leads faster, for a commission. Your franchisor may be able to recommend reputable brokers with whom they have worked in the past.
- Outsource: A franchise sales outsourcing (FSO) company takes care of every part of selling a franchise business, from marketing to qualifying and closing leads to preparing documents. As with a broker, selecting an FSO that knows your particular industry is key. Unlike a broker, however, they usually do not generate the actual leads, and their fee structure adds a monthly processing charge to their commission.
Do It Yourself:
- Do It Yourself: As a franchise owner, you’re probably accustomed to doing most everything yourself, so adding the task of selling the company may be in your comfort zone. While this is the most cost-effective option, and likely the best if you are selling to an internal buyer, it may also be the most time-consuming, and may distract you from the day-to-day operations of the business.
The decision to sell a franchise is not one you have made lightly, so neither should be the decision how to sell a franchise. Regardless of which avenue you choose, act honestly, transparently and deliberately to ensure a successful sale for all parties involved.