how long does it take to sell a franchise

How Long Does It Take for a Lead to Become a Franchise Sale?

• 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. ...
• A sound franchise marketing budget and plan can make a difference ...
• Determine how aggressive your franchise growth strategy must be ...
• Your franchise sales technique matters ...
• Convert leads to franchise sales with our sales process consulting services ...

Full Answer

Is it hard to sell a franchise?

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.

How long does the franchise process take?

The franchise purchasing process — from the search to the purchase — will take three to four months. Typically, it will take another two to six months before you open your doors to customers.

How long does it take to turn a profit franchise?

One common misconception when it comes to operating a franchise is that once you sign on the dotted line and open for business, the customers and revenue will start flowing. This is typically not the case. It normally takes a year or two to become profitable.

Can you sell a franchise that you bought?

Most franchise agreements contain strict limitations on the franchisee's ability to sell their franchised business. Fundamentally this makes sense, as the franchisor needs to make sure that it has final say over who gets to do business under its name and using its proprietary system and methodologies.

How do I sell my business franchise?

Whether you are ready to sell or you are just considering it, here are our top tips for selling an existing franchise:List your franchise for sale on FranchiseFlippers.com. ... List your franchise on other online business listing websites. ... Reach out to fellow franchise owners in your franchise system personally.More items...

How many hours do franchise owners work?

Owning a franchise unit can be demanding, requiring work of 60 to 70 hours a week, but owners have the satisfaction of knowing that their business's success is a result of their own hard work. Some people look for franchise opportunities that are less demanding and may only require a part-time commitment.

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.

What is a good return on a franchise?

What is an “acceptable” investment is 100% up to the investor. However, there is an oft-repeated rule of thumb that, after the second full year in business, a franchisee should be realistically able to anticipate a 15- 20% per year ROI plus an equitable salary for whatever work they do in the business.

Do franchising businesses make good money?

Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

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 much do franchise owners 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 you sell a franchise back?

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 long does it usually take to write a franchise agreement?

Franchisors should think that these percentages and fees should efficiently cover expenses and services such as opening support, store visits, employee salary, etc. Meanwhile, the writing process usually takes around or less than a month until every detail is verified by lawyers and the agreement is finally signed.

How long does it take to become a franchisor?

If franchising is right for you, how long will it take you to franchise your business? Timelines can vary but franchising a business generally takes between 90 and 120 days. During this time period new franchisors should expect a lot to be happening.

Is owning a franchise a full time job?

Buying a franchise doesn't have to mean making a full-time commitment. Believe it or not, there are many franchises that can be run on a part-time basis, especially when you first start out.

Is owning a franchise a lot of work?

Warning. Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

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 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.

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.

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.

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, ...

A business can go from one unit to a franchise family in just a few short months, but for many, the process takes years

Franchising a business is simple. Just file all the necessary paperwork, set your fee and royalty structure and then go sell the business model to eager entrepreneurs. The entire process can take a few short months.

By 1851 Staff

Franchising a business is simple. Just file all the necessary paperwork, set your fee and royalty structure and then go sell the business model to eager entrepreneurs. The entire process can take a few short months.

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.

How long does it take to open a franchise?

Typically, it will take another two to six months before you open your doors to customers. However, if you purchase a home-based franchise opportunity, you should be able to open for business approximately two months after you sign your franchise contract.

How to purchase a franchise?

Typically, you’ll visit several different franchise opportunity websites until you narrow it down to a few franchises that look interesting. Here are three things you should be looking for in a franchise. 2. Contacting A Franchisor.

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

• 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. ...

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Benefits

Tips For The Sale

Post-Sale Obligations