6 steps to selling your franchise
- 1. Get your ducks in a row Before you start to advertise it for sale, ensure your business is neat and tidy. ...
- 2. Create a prospectus of sale In order to sell your business, you’ll need to create a prospectus of sale. ...
- 3. Appoint a solicitor ...
- 4. Franchisor approval ...
- 5. Advertise your business ...
- 6. Non-disclosure agreement ...
Full Answer
How long does it take to buy a franchise?
How to close a franchise?
What is FDD in franchising?
What is the introduction of a franchise?
What is franchising discussion?
What is the importance of collecting feedback from other franchisees?
Where is franchise discovery day?
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How do I start selling a franchise?
Selling Your Franchise in Three Simple StepsStep 1: Prepare Your Franchise for Sale. Start by contacting your franchisor. ... Step 2: Market Your Franchise for Sale. Most business brokers use online portals and their own proprietary databases to market businesses for sale. ... Step 3 – Negotiate and Close the Deal.
What are the steps in franchising process?
Steps to Start a FranchiseStep 1: Research your options. ... Step 2: Select a franchise that aligns with your business goals. ... Step 3: Create an LLC or a corporation. ... Step 4: Arrange financing. ... Step 5: Talk to the franchisors and franchisees. ... Step 6: Talk to members of your community. ... Step 7: Create a business plan.More items...•
How does a franchise begin?
You need sufficient starting capital to purchase or lease space for your business, acquire equipment and starting inventory, obtain necessary business licenses and insurance, and hire and train staff. Start your business with a built in support structure. Franchisors would like to see their franchisees to succeed.
How many stages are in the franchise sales process?
This relatively simple, six-step process takes much of the guesswork out of buying a franchise. It should be transparent and centered around determining if the fit between the candidate and the franchise system has the stamina to last for the long-term.
What are the three steps of franchising?
Here are 3 steps you'll need to take before you open your franchise.Step 1: Finding A Location. It's important to know that if you purchased a franchise that requires a physical location, it may take longer to secure a location that you and your franchisor approves of. ... Step 2: Permits And Taxation. ... Step 3: Training.
What are the five basic steps in creating franchising program?
The following are the steps to franchise your business:Determine if franchising is right for your business.Issue your franchise disclosure document.Prepare your operations manual.Register your trademarks.Establish your franchise company.Register and file your FDD.Create your franchise sales strategy and budget.
What are the requirements to franchise?
Some franchise requirements to take into consideration may include:Credit score. Minimum credit scores vary by franchisor, but most consider a grade of 680 or higher as ideal.Net worth. ... Available cash. ... Previous industry experience. ... Management experience. ... Total investment required. ... Ongoing costs. ... Training and support.
What franchise is the most profitable?
Most Profitable FranchisesDunkin'7-Eleven.Planet Fitness.JAN-PRO.Taco Bell.Orangetheory Fitness.Great Clips.Mac Tools.More items...•
How much money do you need to start a franchise?
Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.
What is franchise life cycle?
A franchise, like any business, has a life cycle. Although, every franchise is different, most successful operations will progress through these stages, going from infancy, into growth, maturity and finally to renewal or decline where the franchise is either wound up or revamped into a new stage of growth.
What is a franchise sale?
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark.
What three levels of development should accomplish before starting franchise program?
Leadership / Management.Business Process Re-Engineering.Financial Transformation.
What are the requirements to franchise?
Some franchise requirements to take into consideration may include:Credit score. Minimum credit scores vary by franchisor, but most consider a grade of 680 or higher as ideal.Net worth. ... Available cash. ... Previous industry experience. ... Management experience. ... Total investment required. ... Ongoing costs. ... Training and support.
What are the franchising requirements in the Philippines?
Required Documents to Be Submitted to the FranchisorLetter of Intent to Franchise. A Letter of Intent is used in most business transactions like franchising. ... Application Form. ... Site Location Proposal. ... Business Name Registration (Department of Trade and Industry) ... Barangay Clearance. ... Business or Mayor's Permit.
What steps should a potential franchisee take before investing in a franchise?
Buying A Franchise: 5 Essential Steps To Take Before InvestingAssess Your Skill Set. ... Identify Your Passion And Long-Term Goals. ... Calculate Your Investment Level And Future Profitability. ... Speak With Franchisees And Assess The Franchise Disclosure Document. ... Get To Know The Franchisor.
How do I start a franchising business in the Philippines?
How to Start a Franchise Business in the PhilippinesReach Out to Your Target Franchisors. Contact various companies that offer a franchise in your preferred industry. ... Prepare and Submit Franchise Requirements. ... Meet the Franchisor. ... Review the Franchise Agreement Carefully.
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.
The franchisees
Let's start with the franchisees. Franchisees can be your biggest advocate or your biggest roadblock in the franchise sales process. If your franchisees are consistently talking prospects out of your brand because they don't make money or see other fundamental flaws in your brand, STOP and go fix it.
Training and support
Training and support should be directly engaged with your prospects. I recommend a call with department heads, individually or jointly, either before or during the validation process. This is a huge value-add for your prospect and a triple play for franchise development.
Real estate
The real estate department's involvement in sales is a delicate balance. If candidates become too invested in real estate before franchise agreement execution, they may delay moving forward until they have found the "right" real estate.
Budgeting & the C-suite
As a CDO, it is your responsibility to set realistic expectations with the folks at the helm of the company. Shutting down unrealistic development goals is a must. Franchise sales is math: budget + time to close = projections, period. Also, budget notwithstanding, a franchise organization should only grow so fast.
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How long does it take to buy a franchise?
It is important to note that before you become a franchise owner, the franchise sales process can take 3-6 months or even a year to complete. Additionally, it is also important to note that different franchisors may have different processes for awarding you a franchise ...
How to close a franchise?
If you are confident with the opportunity, you can close by signing the franchise agreement. At this point, you'll be asked to pay the necessary fees and then the exciting process of launching your franchise location begins.
What is FDD in franchising?
Reviewing the Franchise Disclosure Document (FDD) is a critical part of the due diligence process. Most importantly, you'll learn about the franchise system's financials and details around your investment and start up costs. The FDD provides insights into the nature of the relationship the franchisee will have with the franchisor and outlines the Franchise Agreement. It helps the franchisee understand the franchisor better.
What is the introduction of a franchise?
The introduction is pretty self-explanatory; when the franchisor and the prospective franchisee get to know each other. Although, this goes beyond having a casual conversation about the brand and your candidacy. The introduction involves a brand overview, including the history, the mission, and the values of the brand.
What is franchising discussion?
Basically, these discussions cover how the franchisee can successfully launch the business. Part of running a successful business is having a foundation of knowledge about the operating playbook. The franchisor tells you about the training process and the support that will be provided to allow you to follow its proven systems .
What is the importance of collecting feedback from other franchisees?
Collecting feedback from other franchisees is essential before signing a franchise agreement. Through this franchise sales process, you will be able to establish what you can expect from the franchise and identify any questions, issues, or concerns you may have.
Where is franchise discovery day?
Discovery Day usually takes place at the franchisor's corporate offices. Other potential candidates and franchisees may be in attendance as well.
What is Franchising?
Imagine that you're opening your own McDonald's. To do this, you have to buy a McDonald's franchise. In order to qualify for a conventional franchise, you have to have $250,000 (not borrowed). Your total costs to open the restaurant, however, will be anywhere from $685,750 to $1,504,000, which goes to paying for the building, equipment, etc. Forty percent of this cost has to be from your own (non-borrowed) funds.
How to negotiate a franchise agreement?
There are many elements of the franchise agreement, as well as the franchise deal itself, that can benefit from the advice of an attorney. These can include: 1 Reviewing the franchisor's offering circular (the UFOC) and evaluating the opportunity 2 Negotiating points of the final contract 3 Limiting your personal liability by establishing the correct business structure 4 Dealing with trade secrets and other proprietary issues 5 Establishing your own trade name 6 Dealing with state statutes
What is the FTC rule for franchising?
The Franchise Rule deals with the franchising contract and requires that the franchisor give full disclosure of earnings, company history, litigation, and key-officer experience levels. It also requires that contact information be provided for existing franchised units. The rule does not, however, cover anything that happens after the contract is signed, such as problems with product availability, site selection, and placement of other units within the same geographical market.
Why do franchisors have to protect their proprietary information?
In order to do this, they establish restrictive covenants for their franchisees. These covenants govern the things a franchisee can do.
What is franchising business?
Think of franchising as paying someone for his or her business strategy, marketing strategy, operations strategy, and the use of his or her name. That's pretty much what franchising is -- you are establishing a relationship with a successful business so you can use its systems and capitalize on its existing brand awareness in order to get a quicker return on your own investment. You are using its proven system and name, and running it by its rules.
Why is franchising important?
This is because franchises typically get up and running faster, and are profitable more quickly. This can be a result of better management as well as a well-known name.
When was the franchise act introduced?
National fair franchising legislation was also introduced. HR 3308, also known as the Small Business Franchise Act, was introduced in 1999 by representatives Howard Coble, R-NC, and John Conyers, D-MI. The legislation would provide franchisees with a right of action in federal court in the event that the corporate franchise violates any provision of HR 3308. It was sent to the House Subcommittee on November 17, 1999. It was tabled during the 106th Congress, but is slated for reintroduction in the 107th Congress. There is bipartisan opposition to the bill in the Congress; however, organizations such as the American Franchisee Association highly support it. Opposition states that the bill tries to establish a "one size fits all" model to franchising, and that simply won't work with the many differences in franchise businesses and systems.
How to sell a franchise?
You also need to prepare to sell your franchise before you actually place it on the market. Included among the preparations you will need to do are establishing the value of the franchise, setting a price, compiling financial information, notifying key employees (if necessary), and putting together a sales packet.
How to promote a franchise?
Make certain to abundantly promote your franchise through every possible avenue. If you need help with this, you might even want to consider listing it with an agent. Also take some time to practice your sales pitch. Recruit a few friends to critique your pitch before you "go live" with actual buyers.
How to keep your franchisor informed?
It's important to keep your franchisor informed about your plans to sell the franchise at the very beginning of the sales process. Many franchisors have rules regulating franchise sales. These rules should have been listed in the franchise contract you signed when you bought the franchise. Go back over those rules with the franchisor to make sure everyone is on the same page.
Can a franchisor sell a franchise?
Your franchisor might also be able to offer assistance in selling your franchise. Sometimes franchisors are aware of potential buyers who are interested in a specific territory and are looking for a relatively "turnkey" operation.
Is it necessary to know the market before you list your franchise?
It is absolutely imperative to have a basic understanding of the market before you list your franchise. How much have similar operations sold for recently? Is the market hot or cold right now? What type of person is most likely to buy a franchise like yours?
Do you have to prepare for a franchise sale?
Be aware that some franchise sales require more upfront preparation than others. Again, talk to your franchisor for specific advice about what you may need to do for the sale of your franchise.
How long does it take to buy a franchise?
It is important to note that before you become a franchise owner, the franchise sales process can take 3-6 months or even a year to complete. Additionally, it is also important to note that different franchisors may have different processes for awarding you a franchise ...
How to close a franchise?
If you are confident with the opportunity, you can close by signing the franchise agreement. At this point, you'll be asked to pay the necessary fees and then the exciting process of launching your franchise location begins.
What is FDD in franchising?
Reviewing the Franchise Disclosure Document (FDD) is a critical part of the due diligence process. Most importantly, you'll learn about the franchise system's financials and details around your investment and start up costs. The FDD provides insights into the nature of the relationship the franchisee will have with the franchisor and outlines the Franchise Agreement. It helps the franchisee understand the franchisor better.
What is the introduction of a franchise?
The introduction is pretty self-explanatory; when the franchisor and the prospective franchisee get to know each other. Although, this goes beyond having a casual conversation about the brand and your candidacy. The introduction involves a brand overview, including the history, the mission, and the values of the brand.
What is franchising discussion?
Basically, these discussions cover how the franchisee can successfully launch the business. Part of running a successful business is having a foundation of knowledge about the operating playbook. The franchisor tells you about the training process and the support that will be provided to allow you to follow its proven systems .
What is the importance of collecting feedback from other franchisees?
Collecting feedback from other franchisees is essential before signing a franchise agreement. Through this franchise sales process, you will be able to establish what you can expect from the franchise and identify any questions, issues, or concerns you may have.
Where is franchise discovery day?
Discovery Day usually takes place at the franchisor's corporate offices. Other potential candidates and franchisees may be in attendance as well.
The Franchisees
- Let's start with the franchisees. Franchisees can be your biggest advocate or your biggest roadblock in the franchise sales process. If your franchisees are consistently talking prospects out of your brand because they don't make money or see other fundamental flaws in your brand, STOP and go fix it. You can't, and shouldn't, sell around validation...
Training and Support
- Training and support should be directly engaged with your prospects. I recommend a call with department heads, individually or jointly, either before or during the validation process. This is a huge value-add for your prospect and a triple play for franchise development. First, prospects will see that you have a culture of transparency, which should lead to them being more comfortable i…
Real Estate
- The real estate department's involvement in sales is a delicate balance. If candidates become too invested in real estate before franchise agreement execution, they may delay moving forward until they have found the "right" real estate. Unless preapproval of real estate is part of your model, the Real Estate department shouldn't be reviewing potential leased sights until a franchisee is on bo…
Budgeting & The C-Suite
- As a CDO, it is your responsibility to set realistic expectations with the folks at the helm of the company. Shutting down unrealistic development goals is a must. Franchise sales is math: budget + time to close = projections,period. Also, budget notwithstanding, a franchise organization should only grow so fast. In a "hot" industry, keeping the reins on franchise sales w…
Evaluation and Application Process
- Throughout the sales process, there should be a structure that requires the buyer to “Give to Get”. This concept is simple, to continue through the sales process, the buyer must provide feedback and show commitment to the franchise buying process in order to be progressed through the model. This could be as simple as requiring the franchisee to fill out a single application and eva…
Goals / Budget
- Develop a Marketing Plan for your franchise which outlines a franchise sales and marketing program for the first 12 months of the Franchise sales effort. Present industry standards for establishing a budget is $1,000 – $3,000 per unit sold on average, it should be your plan and goal to bring this average down and find ways to more efficiently intro...
Five Good Reasons
- An excellent way to be clear on why anyone should buy our Franchise is to develop a list of three to five good reasons as to why an investor would buy into your Franchise system. These will be your key points as to what the value of your franchise model is and these should be reiterated in all of your Franchise marketing communications. Here are five possible good reasons as a refer…
What to Do with Leads? How to Handle A Franchise Lead
- It is important to remember that anyone can visit your site and request information on a franchise. Just as in the phone-screening process, we will need to determine whether a lead that comes in through the franchise lead generation site is qualified or not. We won’t waste our time on unqualified leads and work through an efficient process to disqualify those who do not fit our sp…
Introduction
- The introduction is pretty self-explanatory; when the franchisor and the prospective franchisee get to know each other. Although, this goes beyond having a casual conversation about the brand and your candidacy. The introduction involves a brand overview, including the history, the mission, and the values of the brand. At this stage, the goal is to create a relationship between the two parties…
Review of The Franchise Disclosure Document
- Reviewing the Franchise Disclosure Document(FDD) is a critical part of the due diligence process. Most importantly, you’ll learn about the franchise system’s financials and details around your investment and start up costs. The FDD provides insights into the nature of the relationship the franchisee will have with the franchisor and outlines the Franchise Agreement. It helps the franc…
Logistics
- In this step, the candidate receives support from the franchise’s sales team on how to build the business. The franchise provides demographics, target markets, suitable real estate location suggestions, and assistance with other aspects of the business. Basically, these discussions cover how the franchisee can successfully launch the business. Part of running a successful bu…
Validation
- Next in the franchise sales process is hearing testimonials from former and current franchisees. It’s highly recommended that each franchise candidate contact other franchise owners to have frank discussions about their experience. This is a great way to learn about the company’s culture and how others view the franchise leaders and services. Then,...
Franchise Discovery Day
- At this point, you and the franchisor will get to know each other well enough to determine if you will make a good team. Discovery Dayusually takes place at the franchisor’s corporate offices. Other potential candidates and franchisees may be in attendance as well. It is a perfect opportunity for you to learn about the franchise’s operations and ask questions. By the end of thi…
Closing
- To help you make a decision, you may want to hire a consultant or consult with your attorneyor accountant to evaluate whether the opportunity is right for you. If you are confident with the opportunity, you can close by signing the franchise agreement. At this point, you’ll be asked to pay the necessary fees and then the exciting process of launching your franchise location begins. Th…