Before going out there and looking for potential buyers to your franchise, there are some things that must be considered first. These include consulting with franchise professionals, doing extensive research regarding the franchise selling market and properly screening potential franchise buyers. And most importantly, checking the sale conditions with the relevant franchise agreement.
In order for a franchise sale to become successful, the following steps must be taken into consideration:
- Review the franchise agreement
- Consult all relevant professionals
- Create a business profile for the franchise
- Put the franchise up for sale and determine a sale price
Review the franchise agreement
Before jumping into any franchise sale initiative, it is best to first go through the franchise agreement and check if there might be certain provisions in it that could compromise a franchise sale in the near future. There are different kinds of franchise agreements depending on the franchisor, and each has different rules and regulations when it comes to selling a franchise.
Some franchisors might require franchisees to sell the franchise back to the franchisors themselves, while some franchisors offer some sort of assistance for franchisees who are having a hard time looking for a buyer for their franchise, and yet other franchisors give their franchisees free rein when it comes to looking for potential franchise buyers.
Consult all relevant professionals
It is important to consult professionals when it comes to preparing your franchise for a sale. This includes engaging the services of a specialist franchise lawyer to cover all legalities, consulting an accounting professional so that all finance-related issues can be resolved before the franchise sale starts, and engaging a commercial real estate appraiser to properly determine the total sale value of the franchise.
Consulting professionals before selling a franchise is important if franchisees want to make sure that the sale goes smoothly. Franchisees must also ensure that the professionals they will be consulting have a proven record when it comes to franchising in general.
Create a business profile for the franchise
After doing all of the necessary consultations, the franchisee will now have to create a business profile for the franchise. This will include the franchise type, franchise location, business permit regulations, health regulations, number of employees, company vehicles (if any), as well as the kinds of products and services that the franchise offers to its customer base.
The business profile can also include other details such as assets, information on property taxes, and annual earnings within the duration that the franchisee has owned the franchise. This information will be useful if franchisees want to attract potential buyers who will be able to properly manage and take care of the franchise once the sale has been made and the franchise changes ownership.
Put the franchise up for sale and determine a sale price
After creating a business profile, the franchisee can now determine a sale price for the franchise. Franchisees have to make sure that the sale price is based on the appraisal provided by a commercial real estate appraiser.
It also helps if the franchisee consults the franchisor so they can have an idea of what is the average selling price of their franchises.
If the franchise agreement dictates that the franchisee must sell the franchise back to the franchisor, then the franchisee might not be able to negotiate for a sale price especially since franchisors will usually quote a specific price range for the sale.
On the other hand, if the franchise will be sold to an outside buyer, then franchisees are advised to negotiate a price that is competitive and within the desirable appraisal range at the same time.