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5 Considerations Before Selling Your Franchise Business

3/1/2022

 
There will come a time in every entrepreneur’s career when they are ready to move on from their business. However, selling a business is not as easy as going to the bank and cashing a check for your years of hard work. 

Statistics show that it can take up to 15 months to sell a small business. This process may take even longer if you own and operate a franchise, which comes with its own special set of restrictions and hurdles to clear. To help in this regard, the following breakdown looks at 5 considerations for
how to sell a franchise.
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1. Look to Get Listed On Franchise Resale Websites

There is no shortage of online real estate and business listing websites. While it is definitely worthwhile to put your franchise on any or all of these platforms, also look into sites that are specific to buying and selling franchise businesses.

This can increase your exposure to high-interest buyers. There are countless reasons why a buyer may be interested in only purchasing a franchise. Perhaps they are a current franchisee and want to expand their geographic footprint. Maybe they can achieve greater economies of scale by adding your franchise to their portfolio.

Whatever the case, listing your business on a franchise resale marketplace reduces the chances of it getting lost in the crowd of non-franchise businesses, helping you stand out to the most interested buyers. 

2. Highlight What Sets Your Location Apart

It may seem like pricing your franchise business is a piece of cake compared to other types of property valuations. Simply look at what other franchise locations are selling for, plug your financials into a business valuation calculator, and find the common ground between the two figures.

Like most matters business-related, it is never that simple. Although there are some advantages and efficiencies that come with owning a business with a recognizable brand, there is a good chance you are selling your business short if you go “by the book.”

Look at what sets your franchise apart from other locations. Is real estate set to appreciate in the coming years? Is your business convenient and easy to access? Have you made any recent upgrades or technological investments?

Specifically on this theme, make a point of connecting with buyers on a humanitarian level. Show that you are more than just a corporate machine. Demonstrate how your business gives back to the local community. Outline your plans for providing jobs and retaining local talent. As 86% of people say they are hesitant to buy from a company that has a bad rap, it can really be worth your time to demonstrate how your franchise cares for its local community.

3. Leverage the Experience of the Franchisor

Franchisees can sometimes have ambivalent feelings when it comes to their franchisor. Sure, it’s nice to have a recognizable brand and proven business plan when starting your path as an entrepreneur. However, franchise fees, royalties, and/or creativity restrictions are sure to leave a bitter taste in the mouths of many franchisees. 

Even if your current feelings toward your franchisor aren’t so savory, you need to find a way to look past them during the selling process. The franchisor has likely seen dozens of stores change hands and can be a valuable resource to you as you navigate your sale. In addition, the franchisor is likely to be aware of other franchisees who may be interested in expanding, so they can help put you in contact with more qualified buyers.

At the end of the day, the franchisor wants to see all of their locations succeed, so utilizing their experience during the selling process can be extremely beneficial. 

4. Work With a Business Broker

Speaking of valuable resources, a business broker is a professional, similar to a real estate agent, who can help you facilitate the sale of your business. In addition to having a broad knowledge of the market and experience with how to value a business, a business broker can help in the following ways:

  • Ensuring that buyer candidates meet all requirements set forth by the franchisor, such as minimum cash to put as a down payment
  • Navigating all scenarios unique to franchise sales, such as franchise and transfer fees
  • Facilitating communication between the buyer, seller, and franchisor (the franchisor must agree to all terms of sale)
  • Having all pertinent paperwork in place, such as the general release and any non-compete agreements

5. Communicate With Your Employees

No matter the type of business, it is always best practice to inform your employees of a potential sale. Give them updates on what their continuing status will be with the franchise. Help them plan the next move for their careers if they are uninterested in staying through the transition.

On top of this, it is also possible that your buyer may be a member of your current staff. Some of your more long-term employees will have a strong understanding of how the industry works and be looking for ways to advance their careers. What better way than owning and operating their own location!

Consider All Options When Selling a FranchiseSelling a franchise has a number of considerations that do not apply to normal business sales. These hurdles can significantly stall the process if not planned for properly. To help you navigate these waters, getting listed on a franchise resale marketplace, highlighting your business’ key distinguishing features, leveraging the experience of your franchisor, working with a business broker, and communicating with your employees are 5 helpful considerations before selling your franchise business.

Need to speak with a business advisor? Get in touch with Business Loans Michigan today!

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