how much could you sell a franchise for

Full Answer

Can I make money with a franchise?

When it comes to making money franchising, and if your franchise program is built right (hint, hint), you may have additional sources of revenue built into your franchise program.

What is the average cost of a franchise?

While the franchisor can provide you with an estimate for the working capital needed, you should do your own research too. In general, most franchise fees are between $20,000 and $50,000. Mobile businesses or home-based businesses could be less than $20,000.

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 make your own franchise in 5 steps?

• Set Realistic Goals. Franchising is more of a marathon than a sprint. ...
• Research Your Competitors. ...
• Develop Your Franchise Offering for Both Individual and Multi-Unit Sales. ...
• Make Sure Your FDD Is Compliant for Every State. ...
• Learn Franchising and Get Involved in the Franchise Community. ...

How much does it cost to franchise a business?

The cost to franchise your business, generally, ranges from $18,500 to $84,500. Actual costs that you incur will depend on the franchise team that you are working with, the industry that you are in, and the level of support that you need. Below is breakdown of the estimated costs associated with the franchise development process and the necessary steps to franchising your business. These steps include development of your FDD, preparation of your franchise operations manual, formation of your new franchise company, preparation of financial statements, and franchise registration.

How much does it cost to register a franchise?

Estimated Cost $1,000 to $4,500.

How much does it cost to build a franchise website?

You’ll need to invest in a webpage and, eventually, a website that educates and informs prospective franchisees about your franchise, why you’r different and how you franchise can improve their lives. Estimated Cost $2,500 to $15,000.

How much does it cost to start a franchise PR agency?

Franchise PR budget significantly. Estimated Cost $15,000 to $25,000.

How much does it cost to make a franchise presentation?

You can do this yourself or with an outside team. Estimated Cost $0 to $3,000.

What is FDD in franchise?

FDD Legal Fee Development – Your FDD is a legal document that will serve as the entire legal underpinnings for your new franchise system and includes all of the legal agreements and documents, including your franchise agreement, between you and your franchisees.

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.

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 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 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.

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.

What happens when you try to sell a franchise?

When you try to sell a franchise, you may be competing with one very large, well-financed competitor: your franchisor . 'While many franchisors tell their franchisees that they will assist in finding a buyer when the franchisee chooses to sell, my experience is that most do not offer much, if any, assistance,' says Andresky.

What are the challenges of selling a franchise?

Selling a Franchise: The Challenges. 1. Transfer fees and restrictions. Franchisors like to control and vet who they accept as franchisees, which means there is often an approval process to undergo and transfer fees to pay when a franchise unit changes hands.

Why are small businesses so hard to sell?

The reason most smaller businesses are hard to sell is that they are too reliant on the owner as the rainmaker. With a franchise business, at least some of the reason customers find and return to the business is the brand the franchisor has built. 2. Buyers get an operations manual.

Why are independent businesses harder to sell?

Another reason independent small businesses are typically harder to sell is that their operations are inside the head of the founder. 'One of the benefits of selling a franchise is you have a system to follow, initial training and ongoing support ,' says Larry Lane, owner of VR Business Brokers of McKinney, Texas.

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.

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.

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