Selling A Franchise

Starting a franchise business is a long-term commitment. It's not something you should enter into lightly or with a short-term strategy. However, it's important to be realistic. There may well come a time when you decide to cash in on your investment and sell your franchise business.

So even though you’re in it for the long haul, it’s probably worth thinking about your exit strategy. It’s wise to plan ahead, and it will keep you focused on your goals ambitions for the business; after all, one of your main objectives is probably financial security for years to come, for which the future sale of your franchise business could hold the key. Thinking far ahead will also help you plan carefully so you sell the business at the right time and maximise the value you get from it.

When considering your end game, the first thing to do is to study your franchise agreement, which will include the terms for exiting the business. You need to know where you stand legally and the procedure you’ll be required to follow.

Also be aware that no matter what plans you make, factors outside of your control might dictate when you need to sell the business. However, regardless of the timing, your priorities will be finding a suitable buyer and getting the best price you can under the circumstances. But remember, the most effective way of ensuring you get a good price for your franchise is to make it as valuable and profitable as possible, so don’t allow your exit strategy to distract you from your main business goals.

The value of your franchise will be judged on various factors, including current and projected profits, growth potential, cashflow and assets. You might be able to get a rough idea of the value of your business by looking for the recent sale prices of similar franchises in your area.

Any potential buyer will carry out due diligence so it is important to have all your accounts, paperwork and contracts in order. You need to show that supplies, services and profits are sustainable and secure.

Bear in mind that any valuation of your business will be subjective and open to negotiation. Be prepared for the process to be a long, drawn-out affair.

Also be aware that regardless of how suitable you deem any potential buyer to be, the franchisor will make the ultimate call over whether they’re fit to take over. The prospective purchaser will need to satisfy the same criteria as you did when you were first approved by the franchisor to start your business. So it makes sense to involve the franchisor in the process from the start. In fact, the franchisor will probably be able to put forward some potential buyers, although they might charge a finder’s fee.

There is also the option of using a broker to find a purchaser for your business. Although they will charge a percentage of the sale price, they will probably have access to a number of suitable candidates, relieving you of the pressure of finding a buyer and allowing you to get on with putting everything in order for the sale.