can you sell a franchise business

Should you buy a franchise business?

Others also have their unique reasons on why they buy a franchise business. One of the few good reasons of buying a franchise business is that it lets you avoid all those potential risks experienced by other start ups. This is also a one way of being smart.

What are the steps of buying a franchise?

• Matches your financial resources
• Provides you with the lifestyle you imagined
• Uses your particular skills and experience
• Provides a recession-resistant product or service
• Has a majority of happy and successful franchisees
• Employs an experienced and enthusiastic staff of personnel who will help you achieve your dreams of business ownership success

Should I buy a franchise or start my own business?

Buying a franchise is very different from starting a mom-and-pop business. Since there is an already established system in place, there is a higher likelihood of success. If you invest in a proven franchise opportunity and follow the system the franchisor has put in place, you should be on your way to running a successful business.

How to successfully franchise your business?

• Present Your Business to Potential Franchisees. After identifying your goals, you may now sell your franchise business model to your prospective franchisees.
• Provide Hands-On Training. If you have a vision for your franchise business, your franchisees must share the same objectives with you.
• Work On the Ground. ...
• Implement The Organizational Culture. ...

Can you sell a franchised business?

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.

Can a franchisee sell their franchise?

For most franchise owners this reward means selling their franchise business to a new owner for the greatest price and at fair terms. But, once the decision to sell your franchise operation is made, it doesn't take long for franchise owners to realize there are multiple paths to consider.

Can you sell back a franchise?

Getting Approval for a Franchise Sale Selling the business back to the franchisor can be a good option, but only if the franchisor is willing to repurchase the business. Furthermore, the franchisor may not be willing to pay an amount that will be sufficient to make you whole.

How much do you sell a franchise for?

Franchises are often valued based on a multiple of revenue, cash flow, or earnings before interest, taxes, depreciation, and amortization (EBITDA). As the name implies, the EBITDA method adds back some expenses to the earnings total, and a franchise can be valued at 4 to 5 times EBITDA.

How do you get out of a franchise?

These are your options:Sell the franchise.Franchisor buy back.Walk out.Dispute resolution and mediation.Negotiating an exit.

How long does it take to sell a franchise?

The average franchise sales cycle is 12 to 20 weeks On average, the total time to close a franchise sale can be up to 20 weeks.

Can I sell my McDonald's franchise?

McDonald's requires that the buyer of an existing restaurant pay a minimum of 25% cash as a down payment, and the balance must be financed for no more than seven years. Each franchise applicant must have at least $500,000 in liquid assets in order to apply.

What happens if you walk away from a franchise?

Under most state laws, however, a franchisee who walks away from his franchise may be successfully sued by his franchisor for abandonment. Further, under many state laws, a franchisee who walks away from his franchise may forfeit some or all of the claims that he may have had against his franchisor.

How do I sell my first franchise?

Here are some effective ways to sell your first franchise:Talk to Customers.Get Signage and Physical Presentations.Focus on Social media.Offer incentives to your employees.Sell Opportunity by Being Early.

Do franchise owners make good money?

Franchise Business Review found that the average annual pre-tax income of franchise owners in America is $80,000. Only 7% of franchise owners make more than $250,000 annually, and 51% earn less than $50,000. Legally, franchisors cannot give income amounts or forecasts of future income.

How do franchise owners get paid?

How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.

How much does a franchise owner make a year?

According to a survey done by Franchise Business Review involving 28,500 franchise owners, the average pre-tax annual income of franchise owners is about 80,000 dollars.

Can a franchisor sell a franchise?

Having your FDD issued is one of the most important milestones on every new franchisor's franchising journey. It means you can legally start offering and selling franchise opportunities to prospective franchisees – and taking your brand to new heights.

Can you sell your McDonald's franchise?

Many franchisors, including McDonald's USA, must approve the transfer of the franchise from the buyer to the seller. Franchisors insist on buyers who have sufficient assets to finance the purchase.

How do you sell a failing franchise?

CONSIDER SELLING THE BUSINESS Often the best answer to a franchise that is not succeeding is for the franchisee to sell the business to a third party who becomes the new franchisee for that territory. This allows the failing franchisee to terminate its obligations under the franchise agreement and under any lease.

How do you market and sell a franchise?

10 Best Ways to Market your FranchiseBuild Your Online Presence Online.Work Social Media.Redo Your Marketing Materials.Be Content Savvy.Understand the Conversion.Redo your Franchise Logo.Understand How Critical a Franchisee Is.Leverage Your Connections.More items...•

What is a franchise agreement?

The franchise agreement that is executed by the franchisor and the franchisee contains, among a lot of other detailed requirements, strict and copious rules and restrictions for the transfer of the franchise rights. Specifically, if you own a franchise – whether it be for burgers, healthcare, fitness, hotels or any other franchise system – there ...

How long do franchise rights last?

Franchisors typically award franchise rights to a franchisee for a minimum of five years and many times quite a bit longer. Most sales of existing franchised units happen in more mature franchise systems rather than in very young ones; though occasionally, a new franchisee realizes early on that they are in over their heads and need to be bailed out – usually by the franchisor.

Why do franchisors have in-house programs?

Some franchisors have in-house programs designed to assist their franchisees in selling their existing units. This is particularly true for a mature brand. One reason for this is that most franchisors award territorial franchises; that is, each franchisee, for as long as it meets minimum operating standards (including sales targets, inspection scores, etc.) has the exclusive right to operate that franchise in a specific territory (subject to the other terms of its franchise agreement). If the franchisor has another qualified candidate for that specific territory, the franchisor is likely to assist its existing franchisee in selling its franchise rights.

What is the importance of knowing what the other fees a buyer will be obliged to pay?

This is particularly pertinent when establishing a price for your business.

Can a franchisor sell a franchise?

Some franchisors will contract with unrelated firms such as Worldwide Business Brokers to sell existing franchise units. This does not eliminate or reduce the resale restrictions in the franchise agreement but only takes the franchisor out of the re-sale business. The existing franchisee that wants to sell and the potential franchisee that wants to buy still need to meet all the requirements outlined in the franchise agreement and the franchisor still needs to approve the sale.

Do you vet a potential buyer before selling a franchise?

All of this means that you would be wise to vet your potential buyers early on – before you even disclose any financial information – by finding out what your franchisor’s requirements are; or enlist the assistance of a business broker with experience in the sale of franchises. Such experienced brokers know the ropes, understand the FDD ( Franchise Disclosure Document) and work with legal counsel that specializes in franchise law, all to your benefit.

Do you have to have the same training for a franchise?

The buyer and its managers will have to meet the same educational requirements, meet the same financial and net worth qualifications, attend the same training classes, go through the same franchisor vetting process, sign a new, current and possibly more onerous franchise agreement and essentially meet all the franchisor’s standards that you did; and maybe more, if those standards have changed which, if your franchise is more than a couple of years old, is probably the case.

Why would a franchise owner want to sell their business?

There are two main reasons why a seller would want to sell their franchise business. Either the business is very valuable and they want to cash out or they simply aren’t running the business well and they want to get out before they lose everything. Since there’s a steady flow of buyers who want to purchase franchise businesses, ...

How long does it take to sell a franchise?

Most sales involving franchise businesses can take anywhere from 2 to 3 months to be completed. This is good because you’ll want to use this time to prepare your budget for leaving the business.

Why are franchisors important?

The reason these rules exist is because the corporate office wants to maintain their company image and they don’t want a franchisee to tarnish that with a business model that is different than their own. Franchisors are always involved in every big decision that a franchise business makes, including the sale of the business. Since franchisors must approve when someone starts a franchise business, they also have to approve the buyer who is purchasing the franchise business from the seller. Like with the original owner of the franchise, the franchisors want to make sure the new buyer is capable of running their proprietary business model and implementing their methodologies into it the same way the seller did before.

What do you need to do before selling a franchise?

Before the sale of a franchise business, the buyer must sign a franchise agreement created by the franchisor. This is the same agreement that the seller had to sign when they first started the franchise business. In addition, the current franchisee (seller) must settle all debts and payment defaults related to their franchise business ...

What happens after a franchise is sold?

After the sale of a franchise business, the franchisee will still have some obligations left after the transfer of the business has been made. A lot of these obligations must do with what businesses or jobs they can and cannot take after the completion of the sale.

What do franchisees do?

So, what a lot of franchisees do is build up their franchise business to the most profitable and successful that it can be and then they sell their franchise business to another buyer. Then, the franchisees move on to another franchise business and try to make that successful so they can do the same thing there.

How long after selling a franchise can you start a competing business?

Most franchise agreements have non-solicitation provisions and non-competition agreements which outline that franchisees cannot start a competing business for the next 2-3 years after they sell their franchise business.

What is franchising in business?

Franchising is about uniformity and control of uniformity, not the needs, preferences, or success of individual franchise owners. In other words, a person that owns his or her own business is concerned only with the performance of his or her own business.

Is franchise business different from owning your own business?

The secret that is often kept from enthusiastic prospective franchisees, however, is that the franchise business he or she is purchasing is actually quite different from “owning your own business” or “being your own boss.”.

Do franchise owners have control over hiring employees?

While franchise owners will likely have control over hiring and firing employees, in terms of the marketing, messaging, products sold, hours of operation, etc., franchisees generally have very little, if any, discretion or control.

What is a franchise flipper?

Whether you are simply gathering information about selling your franchise or need to sell a franchise business quickly, Franchise Flippers can help you determine and execute the best strategy for selling your franchise so you can find the right buyer when the time is right .

Is selling a franchise a big decision?

Selling a franchise is a big decision. Franchise Flippers offers a free phone consultation to discuss if, when, and how to sell a franchise business.

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.

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.

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.

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.

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.

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.

Prepare Detailed Information

Upon making the decision of selling your franchise business, this immediately becomes a product that competes against many other franchise businesses out there available for sale. One important tip when selling a franchise business is to prepare detailed information about your business and present it comprehensively to banks or potential buyers.

Market Your Business

The first 3 months that your franchise business is in the market is very crucial. You need to advertise heavily however, you need to remain conscious about your expenses. Being mindful about your expenses ensures that you will not end up with unnecessary spending and will be able to stick to your ideal marketing budget.

Sell at the Best Price Possible

You only have one chance to sell your franchise business therefore you need to do the process carefully from start to finish. The longer the business stays in the market, the more possible for its price tom drop.

Recommended Articles

How Much Would it Cost to Buy a Franchise Putting up a franchising business or buying a franchise business from franchisor can be a good way to start a business. But you must consider a lot of things like the expenses of putting up a business and a lot more.

Why Do I Need a Business Broker to Help Me Sell My Franchised Business?

You don’t…if you know what your franchise is worth, can locate serious and financially qualified buyers who meet with franchisor approval, can obtain a sale price you’d like to achieve, and are prepared to navigate all the hurdles involved with both selling a business and transferring a franchise. You can certainly attempt to sell your franchised business on your own, and the majority of our current and former franchise selling clients have initially taken a for-sale-by-owner approach, prior to contacting

What is My Franchised Business Worth?

Every business is different, including franchised businesses, and each franchise business has different value to different people. Obviously, there are several basic standards that are used to determine the value of a business, such as location, history, sales trends, profitability, cash flow, the physical condition of the business, whether you lease or own the space, and much more. There are also many market factors and other circumstances at play that can impact the worth of your particular franchise business.

What is a franchisor's primary concern?

A franchisor’s primary concern is improving and bettering their franchise system for the benefit of the franchise, and subsequently their franchisees. Seldom do franchisors have either the time or staff to devote to helping you sell your business or find a buyer for you. They also rarely understand all of the financial inner workings of your particular business, nor do they always have access to this information. Franchisors will explain anything to an approved purchaser regarding the franchise model as a whole and what expected costs should be, but they won’t provide the actual financial data of your existing business to a buyer in the light it should be shown; data that experienced and serious buyers want to know before committing to a purchase.

Do franchisors have to negotiate a sale of a franchise?

Franchisors wish to avoid any liability or conflict of interest when a franchise unit is for sale. They do not like to involve themselves in negotiations between a buyer and seller, nor assist with non-franchise related sale contracts & closing paperwork, provide legal or accounting advice to the parties concerned, and so forth. In essence, if you want to sell your franchise, your franchisor would prefer you make the process as easy and simple for them as possible, for example, you present them a buyer they approve of and they’ll authorize the transfer, provided you handle the rest of the sale process on your own.

Do franchisors have to complete a sale?

Your franchisor may assist you in some capacity, and should always complete a sale/transfer provided that you and your potential buyer have satisfied all of their requirements. However, many franchisors will not directly involve themselves with the sales process in any meaningful way.

Do franchisors want to remain impartial?

Although franchisors generally wish to remain as impartial as possible during the sale process, the fact of the matter is you are leaving and someone else is taking over. No matter how good of a franchisee you have been in the past, the franchisor will, and should, always be most concerned about the present and future.

What does franchising want to do?

The franchisor will want to make sure that the buyer can meet its financial obligations under the franchise agreement (in addition to paying its other bills as they come due), and is not overextended as a result of a hefty loan.

What is a franchisee's execution of a general release?

The franchisee’s execution of a general release, waiving all potential lawsuits against the franchisor

Can a franchisee sell a franchise?

In either case, the franchisee’s right to sell the franchise will be governed by the transfer provisions in their franchise agreement.

Can a franchisee take advantage of the customer list?

Similarly, even if the selling franchisee is able to start a competitive business , they may still be prohibited from taking advantage of the customer list and goodwill they developed during the term of their franchise agreement , as these assets were built by leveraging the mark and processes of their former franchisor.

Rules and Restrictions

Benefits

• The main benefit of selling a franchise business is that you’ll likely have a lot of interested buyers already available to choose from. Since franchises are usually attached to companies with great reputations, buyers are always eager to purchase them because they figure it will be easy to make them successful and profitable businesses. Often time...

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Tips For The Sale

Post-Sale Obligations