After dedicating a huge amount of time, effort and money into your business over years or even decades of your life, selling up can be a daunting prospect. But, done the right way, a franchise resale is your ticket to an enjoyable and financially secure future.
Our series of franchise resale guides are designed to help franchisees and franchisors as they transfer ownership of a business. Before learning about the steps for selling a franchise unit, you might be interested in reading the other articles in our collection:
- Franchise Resales: 4 Benefits Of Buying A Previously Owned Franchise
- Franchise Resales: Planning A Smart And Seamless Exit Strategy
8 steps for selling a franchise business
1. Ask yourself why you’re selling your franchise
Are you selling your business because you’re struggling to meet the demands of the franchisor? Have you failed to achieve the revenue you’d expected? Or did you plan to sell the franchise unit from the outset?
Your reasons for selling your business will determine how much time you have to organise the sale. They’ll also have an impact on whether you can afford to wait for the right buyer and whether you’ll get a good price. Obviously, franchisees who are forced to give up their unit will be in a less comfortable position than those who have chosen to sell up.
2. Calculate how much your business is worth
If you’re going to sell your franchise business, you’ll need to know how much it’s worth. Many factors will influence the value of your business, so it's crucial you consult someone who has experience in franchising and understands the complexities involved in valuations. You should also be able to trust them, as you’ll want to get the best deal you can.
Read Franchise Resales: How To Determine The Value Of A Franchise for more information.
3. Get your financial records in order
Prospective buyers will want to be able to see how you reached your asking price and make sure your business represents a good investment. As a minimum, you should have clear records covering the last two to three years in your business, and they should be presented according to industry guidelines. Most potential buyers will ask to see your accounts, employment records and details of any contractual obligations, as well as any equipment you own or lease.
If your documents are disorganised or missing completely, buyers won’t be impressed, and they may even take this as a red flag and disregard your business altogether. This is just one example of why it’s vital to plan ahead; if you know you’re going to sell your business, you can take special care when filing your accounts.
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4. Collaborate with your franchisor
While many franchisees expect their franchisor to oppose their decision to sell up, it’s likely they’ll support you. They won’t want to work with franchisees who aren’t fully invested in the future of their business. Usually, you can rely on your franchisor to provide relevant information, help you present the sale attractively and even find a buyer.
Some franchisees are nervous about talking with their franchisor about franchise resales. You might be worried the franchisor will take the news as a personal slight, seek to punish you financially for selling your unit or even refuse the sale. However, the vast majority of franchisors understand that business is business and will have been through the franchise resale process before.
5. Take professional advice
While it is possible to organise and execute the franchise resale on your own, you’ll probably get more for your business if you get help from an industry expert. You might choose to consult an accountant or a solicitor with experience with franchising.
During the franchise resale process, you’re likely to feel excitement, frustration and concern. Take the time to effectively plan your exit and trust in the professionals around you. Never underestimate the value of your franchisor, bank representatives, financial advisor or solicitor. You know your business best, but they have lots of experience selling franchise businesses, so you should value their opinion.
>> Read more:
6. Keep your staff in the know
A franchise resale can be disruptive and often causes some level of anxiety amongst employees. They may be concerned they’ll lose their jobs or be forced to change the way they work.
Make sure you tell your employees about your intentions in good time and keep them updated on developments, so they have time to get used to the idea. When jobs are potentially on the line, the least you can do is give your workforce the information they need to plot a course through the transition. The last thing you want is unnecessary panic and the spread of rumours.
7. Find a buyer
There are a few ways you can find a buyer for your franchise resale - here are the scenarios:
- The franchisor already has a potential franchisee in mind. Sometimes franchisors are approached by individuals who would like to join the business but are waiting for the right opportunity. In this situation, you may have to pay the franchisor commission for saving you time by finding the buyer on your behalf.
- One of your employees would like to buy the franchise. This is good news for both you and your franchisor. Not only will the employee probably have the right traits to run the business, but they will also know it inside out and understand what it takes to see success.
- You find a buyer through an advertising campaign. You can boost your chances of a quick and easy franchise resale by promoting it widely; candidates will be more inclined to offer a higher price if they can see there’s competition. You might want to use franchise forums and other popular websites, as well as industry events and conferences to find a buyer. You could even reach out to local investors or existing franchisees to see whether they’re interested in taking on your business.
If you identify a potential buyer yourself, the franchisor will probably want to check their suitability to join the franchise. Ultimately, the franchisor has the final say on who takes on your unit, and you’ll be able to avoid issues if you’re open and honest from the start.
8. Stay focussed
Preparing to sell your franchise unit can be overwhelming. You may feel like there’s a mountain of work to get through, and it can be confusing – especially if you haven’t sold a business before. But don’t let it distract you from your everyday responsibilities.
While you’re sorting out the franchise resale, you should also be making sure your business is running as profitably as possible. Even if you are no longer emotionally invested in it, you still need to focus on maintaining its performance. If you drop the ball in the early stages, you may lose potential buyers, so stay committed until the new franchisee has signed on the dotted line.
So, there you have it; the eight steps for selling a franchise business. For more advice and information, take a look at our other articles for franchisees, or use the search box to find guides on a specific topic.
Alice Tuffery, Point Franchise ©