The takeaway is that you CAN sell your franchise if your agreement allows you to, and you have your franchisor’s consent to do so. The process should look something like this: Give franchisor written notice
How to get financing to buy a franchise?
What is the Best Way to Buy a Franchise?
- 401 (k) Business Financing. Even better, ROBS allows you to finance your business without debt, early withdrawal fees or tax penalties.
- Small Business Administration Loan (SBA Loan) An SBA loan is a government-backed loan aimed at helping American entrepreneurs fund their businesses.
- Other Ways to Fund Your Franchise. ...
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. ...
How to raise money for a franchise?
- Begin at the beginning. Before you choose a franchise to partner with, before you even begin to shop for your ideal franchise, it’s a good idea to determine your current ...
- Try talking to the franchisor before seeking funds elsewhere. ...
- Getting funding is an exercise in risk management and tolerance. ...
- Some food for thought. ...
- You can do this. ...
How to increase sales in a franchise?
- In-Store Advertising. Although it may seem simple, you can use your own stores to broadcast your business. ...
- Networking. Typically, when people think of networking, many think of finding a job. ...
- Internet Marketing. One of the largest and most powerful franchise marketing tools is the Internet. ...
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.
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, ...
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 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 are the biggest franchises?
Some of the biggest franchises that are out there include McDonald’s, KFC, Burger King, Subway, 7 Eleven, Pizza Hut and the list just goes on. Many of the restaurants, gas stations, and fitness clubs that you see are likely franchise businesses which each have separate owners. Of course, they must pay royalties to the corporate office which owns the rights to the business. The corporate office is the headquarters of the company where the owners, or franchisors, manage the overall business and all the franchisees they’ve given licenses to.
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.
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.
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 ...
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.
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.
What does it mean when a franchisor has the right of first refusal?
Simply put, that means that all they have to do is match the price that you have under contract with a potential and you will have to sell to them instead.
Can you sell a franchise to an outside buyer?
There are times when selling a franchise to an outside buyer isn’t a real option. The franchisee might simply be tired, not having realized how much work was involved to get the business to a certain level, and hence cannot make the business presentable for sale. He/she may be in financial distress due to poor performance of the location. Other times there’s a legal breach of the franchise agreement, for example when payments are not made on time or vendors are not paid in a timely manner.
Rules and Restrictions
- The important thing to understand about franchise businesses is that they all must abide by the rules and standards set forth by the franchisors. 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 involv…
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 times, franchise businesses are in central loc…
Tips For The Sale
- Studies have shown that franchise owners tend to get higher prices for their franchise businesses when they sell them early on. Newer listings will motivate potential buyers into grabbing a hold of...
- Before you go ahead and hire a broker to list your franchise for sale, get an appraisal on the value of your business first. That way, you’ll know the right selling price to ask for. This is not …
- Studies have shown that franchise owners tend to get higher prices for their franchise businesses when they sell them early on. Newer listings will motivate potential buyers into grabbing a hold of...
- Before you go ahead and hire a broker to list your franchise for sale, get an appraisal on the value of your business first. That way, you’ll know the right selling price to ask for. This is not on...
- Another very important thing to remember is to not neglect the operation of your business. Even though it is for sale on the market, that doesn’t mean you can just forget about it and only focus on...
- Of course, you should keep the franchisor in the loop about what is going on with your sale. Y…
Post-Sale Obligations
- 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. Most franchise agreements have non-solicitation provisions and non-competition agree...