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How To Sell A Franchises
Business:
As a business
broker and franchise sales consultant I am often asked what the
general process is to prepare and sell a franchise business. It’s
a valid and important question because at some point the vast
majority of franchise owners will want to sell their business for
a variety reasons including retirement, relocation, divorce, owner
burn out, etc. Here are some general tips below that all
franchisees should keep in mind before putting their franchise
business up for sale and will hopefully make the sales process
unfold much smoother.
Contact the
Franchisor:
It’s important to
let your franchisor know that you are considering selling for a
number of reasons. Most franchisor’s have explicit rules (read
your franchise agreement) regarding the transfer of franchise unit
to new ownership including buyer qualifications, disclosures,
transfer fees, etc. Most franchisor’s can also be very helpful in
the consummation of the re sale and may even have a prospective
buyer on file who has expressed an interest in your specific
location or territory.
Sale Preparation:
Before moving
forward with a listing it is imperative that franchise owners
invest the time to prepare and provide sufficient information for
a comprehensive listing package that should include a business
summary profile, equipment & asset list, and most importantly
current and past financial statements. Most prospective buyers
will not move forward with a business
purchase unless they and
their advisors have been provided adequate financial information
to verify the business is a good investment. I would strongly
recommend that you consult with your accountant or book keeper to
help prepare your business records to help validate and support
your asking price.
As far as
developing a business profile, most professional Business Brokers
are very good at helping business owners at organizing and
preparing a professional business profile which can be an
instrumental tool in the sales process. A professional and
thorough profile can also be invaluable in ultimately saving time
for both the Seller and Buyer. You can
find a business
broker in you area by accessing business broker directories on
the web.
Pricing Your
Franchise to Sell:
Industry sales
statistics indicate that the #1 reason why most small businesses
and franchises don't sell is because they are overpriced. It’s
very important for business owners/sellers to establish a
realistic and credible asking price for their business that can be
supported on a number of levels, including financial history and
market comparables. You should consult with your franchise company
or other franchise owners in your system about recent re sales in
the market to give you an idea where the market is. You can also
use this
free business valuation calculator
to give you a rough idea what your business might be worth.
You may also want
to find and consult with a local Business Broker in your area
about demand and supportable pricing guidelines for your type of
franchise business. It’s also important in most cases to offer
terms to the prospective buyer because the majority of small
business acquisition deals will not be acceptable for bank or SBA
financing.
Confidentiality:
Unlike the sale
of assets like real estate, maintaining the confidentiality of a
small business sale can be very important to the owner/operator
for a number of reasons. It’s not unusual for employees,
customers, and even vendors to become very concerned (or worse) if
they become aware that the business for sale. Competitors may also
use the knowledge of the business being on the market to gain
potential unwanted and untimely advantages.
The best way to
maintain the confidentiality of a sale is to hire a professional
business broker or intermediary that has experience in
confidentially marketing businesses and franchises for sale. This
includes providing services such as screening, qualifying, and
requiring prospective buyers to sign a non-disclosure agreement
before releasing any confidential information.
Marketing &
Advertising Your Franchise For Sale:
Franchise owners
today have a number of options when deciding how they would like
to market and advertise their franchise business for sale. This
includes going the “for sale by owner” route which has advantages
and disadvantages. The biggest disadvantage being the potential
loss of confidentiality and the possible negative effects it may
have on the business and its chances of selling. The biggest
advantage of a “for sale by owner” transaction is the owner
obviously is not responsible for paying a commission to a Business
or franchise Broker.
The most common
option franchise owners choose when selling a franchise is to hire
a professional business or franchise broker to handle the sale.
Most brokers are only paid a commission after the sale is
completed, so there is usually no up front expenses. They are also
familiar with their local market and buyer demands, and can help
maintain confidentiality as well as prepare and price a business
for sale so that it has a good chance of attracting a qualified
buyer.
As far as
advertising, most brokers also employ a number of local and
national “business for sale” web sites that can give a listing
maximum & confidential exposure to prospective buyers. They also
commonly work (or co-broke) with other professional brokers in
their area that might have a prospective buyer for your business.
About Author:
Ray Haiber has
10 years experience as franchise sales consultant as well as a
professional
small Business Broker in Arizona.
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