Do you want to know what your franchise is worth and is it sellable?

by Dione Mauric 28th of November, 2021

Is your Franchise Sellable?

There is no doubt that post the Inquiry potential buyers for franchises for sale have raised the bar and are very particular when it comes to selecting a franchise group they may want to enter into. A buyer will undertake a considerable amount of research, due diligence and scrutinize of the brand with a microscope when deciding whether they are a good fit to purchase a franchise.

This means that when it comes time for selling your franchise it is absolutely critical that you appoint an industry expert, a professional franchise broker that understands how franchising works, and has an in-depth understanding of the franchise system and industry you belong too, and knows how to sell the benefits of belonging to a franchise group.

Using a Franchise Business Broker

It is most definitely not an environment where you appoint a general business broker that lacks an understanding in the support, systems and benefits of
franchising.

A professional franchise broker can explain the franchise model to buyers, articulating the benefits of branding, training, ongoing support and the lower risk of doing business is critical.

Your broker also needs to understand your franchisors selection criteria, how the banks work and be able to guide your buyers through what is often a lengthy contract management process.

Understanding the current environment, market conditions and buyer sentiment is critical to pricing your franchise correctly. You need to draw on the knowledge from a professional broker that has their finger on the pulse, knows what best practice is and has access to recent sales data and pricing activity.

Once you have established your franchise, your ideal goal is to build the franchise and then sell it for future profit. Your franchise business is an investment, so as long as you have a franchise agreement in place you will have the right to sell the business. The more profitable and successful your franchise is, the higher the price you can sell it for.

You will need to obtain franchisor consent, it helps if your buyer has a business plan prepared

Process for Selling a Franchise

There is a process for selling a franchise, it is a little different to selling an independent business, here are the key things you need to consider before going to the market:

Check the franchise agreement for the transfer and assignment processes relevant to buying and selling
You may need to offer the franchisor the first right of refusal
Your Contract of Sale may need to be written to include a special set of conditions specifically drafted to reflect the requirements under your franchise agreement
You will need to obtain franchisor consent, it helps if your buyer has a business plan prepared
The new owner will need to sign the franchisor’s documents, and be aware that in most cases they are responsible for the franchisors legal costs to prepare these documents
If you lease a premises then the lease or licence to occupy will need to be assigned to the new owner
Any financed equipment will either need to be paid out or transferred before settlement.

Remember, be patient and don’t lose sight of your goal of walking away with a profit. When it comes to sell your franchise it typically takes longer as there are multiple parties involved with competing interests including you, the buyer, the franchisor, the landlord and banks for you and the buyer!

Factors That Influence the Value of Your Business

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