These Steps Will Make the Selling Process Easier
Whether you are a franchise business owner (franchisee) looking to sell your existing business or a franchisor looking to grow your brand, selling a franchise is a process. Here, we outline simple steps to make the process easier.
Selling an Existing Franchise
For franchisees who are ready to sell their established businesses, here’s a piece of good news: According to a study conducted at Palm Beach Atlantic University’s Rinker School of Business, franchise resale prices are higher than those of non-franchise businesses. Selling an operating franchise has a higher success rate than selling an independent business because most buyers place a high value on the support provided by the franchisors. Unlike franchises, most independent businesses lack the infrastructure and systems that make a business attractive to buyers.
It’s encouraging to know that you can sell your franchise for top dollar, but where do you start? Here are three simple ways to successfully sell your operating franchise:
Step 1: Prepare Your Franchise for Sale
Start by contacting your franchisor. There is no reason to keep the sale confidential from your franchisor who is accustomed to their franchisees exiting at some point. Ask if they can help you with a resale or transfer. Find out the extent of assistance they offer. The process varies significantly from franchise to franchise.
Some franchisors can help you with multiple elements of the sale. Others, however, do not want any involvement with the resale other than to approve the new franchisee.
Preparation also includes obtaining a valuation, adjusting or normalizing your financial statements, and preparing a marketing package — often called a business summary or an offering memorandum — for your business.
Step 2: Market Your Franchise for Sale
Most business brokers use online portals and their own proprietary databases to market businesses for sale. If your franchisor does not aggressively market the sale of your business, a business broker can do this for you. Marketing the sale of your business varies from franchise to franchise, hence making resales a bit more complex than selling an independent business.
Step 3 – Negotiate and Close the Deal
Once you’ve found a buyer who is interested in both your business and the franchise model, you can negotiate a price and begin with the closing process. There are a few items to consider that make selling an independent business different from selling a franchise, such as the buyer must receive a copy of the FDD 14 days prior to being awarded the franchise. Also, franchisors may require buyers to attend the Discovery Day before they buy the franchise or prior to making an offer. The process varies based on the franchisor’s preferences and practices.
Selling Your Franchise Opportunity
Every franchisor knows that the success of a franchise system is dependent on franchisee success. So simply selling a franchise is not enough. It really comes down to awarding a franchise to the right person. For franchisors who want to grow their brands with quality candidates, here are three simple ways.
Step 1 – Work with Quality Franchise Brokers
Working with quality franchise brokers is an effective and popular way for franchisors to find ideal candidates. In fact, franchise referral consultants (a.k.a brokers) have been found as the top source for lead conversions. Why? Well, by the time the franchise consultant introduces the candidate to the franchisor, they have already determined if the candidate is 1. Right for franchising; 2. understands the brand; 3. has the funds and skills to run the business. In short, franchise brokers save franchisors a ton of work and time by providing quality, qualified candidates.
Aligning with a reputable franchise broker network helps franchisors find the best franchise brokers. Typically, franchise broker networks provide events and other opportunities to meet and build relationships with these helpful professionals.
Step 2 – Exhibit at Trade Shows
Exhibiting at trade shows is a great way for franchisors to get in front of potential candidates face-to-face. Trade shows allow franchisors to market their brands to a large number of qualified prospects at one time. This in-person opportunity gives both parties a chance to get to know each other in a casual setting. They can quickly determine if it’s a good fit and if they like each other enough to enter into a long-term relationship. There are trade show events happening all the time all over the country, giving franchisors a vehicle to focus on specific regions where they want to grow.
Step 3 – Tell Your Story
Of course, investors want to know about the numbers in a franchise investment, but that’s not the only criteria. They also want to know who is behind the brand and what its culture is like. Content marketing is a great way to accomplish this. By creating video testimonials featuring franchise owners and telling their stories, franchisors can share the human side of their brands. These stories resonate with potential buyers and give a colorful picture of what franchise ownership is like.
In franchising, following a proven system is the name of the game. The same holds true for selling a franchise. By following simple steps, franchisors and franchise business owners alike can find success in selling franchises.