how to sell your franchise

14 Tips to Selling a Franchise Fast

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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 is a franchise agreement?

Why do franchisors have in-house programs?

How long do franchise rights last?

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

Do franchisors pay transfer fees?

Can a franchisor sell a franchise?

Do you vet a potential buyer before selling a franchise?

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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 do I sell my franchising?

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 much should I sell my 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.

Can you sale a franchise?

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 long does it take to sell a franchise?

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.

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.

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.

How much is a franchise fee?

Franchise fees are typically between $25,000 to $50,000 on average. 2) Startup Costs: These are the expenses you'll incur to get your new business open and operating. Initial investment costs vary widely from franchise to franchise.

How are franchise prices calculated?

Franchise marketing fees are usually based on your monthly revenue. For instance, if your average monthly revenue is $25, 000, and the franchisor charges a 2% marketing fee, you'll have to pay your franchisor $500. (That's $6, 000 annually.)

Who can sell my franchise?

Hiring a broker to help you sell your franchise can make the process easier, help you find qualified buyers willing to pay top dollar, and simplify what can otherwise be a challenge for both franchisors and franchisees.

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 when you close a franchise?

Financial Implications You may lose monies you've paid into the business if your franchise agreement is terminated. This might include money spent on advertising and marketing, or monies paid to the parent company for the franchise agreement.

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.

How do you end a franchise agreement?

Once you determine to terminate your franchise agreement, you and your attorney must draft a letter and request termination in writing. The letter should detail your intention to terminate the agreement and close the franchise and be sent to the franchisor.

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.

Do franchise owners make 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 to treat a franchise fee | AccountingWEB

Its some & some The inland revenue website contains aggod deal of info on this subject. To summarise you have to look at and value(?) the elements you get for your franchise fee ie if you get a computer and stationery etc you can get tax relief on these whereas the intangibles cannot be claimed.

Selling Your Franchise in Three Simple Steps | FranchiseWire

These Steps Will Make the Selling Process Easier Whether you are a franchise business owner (franchisee) looking to sell your existing business or a franchisor looking to grow your brand, selling a franchise is a process.

Selling Your Franchised Business - The Tax Basics - MSA Worldwide

By Cheryl L. Mullin, JD, LLM, Mullin Russ Kilejian PC. So you’ve operated your franchised business for several years, sales are at record levels, and you’re starting to think about an exit strategy.

Reporting sale of business assets. I have an S-Corp and sold…

Yes, because a group of assets were sold which make up a trade or business and good will is a part of those assets. The IRS is just trying to make sure the buyer and the seller treat the sale the same way and allocate the sales price to the different assets in the same manner. If you had sold the stock in the corporation rather than the assets of the corporation, there would be no need for the ...

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.

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 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.

Do franchisors pay transfer fees?

As far as I know, all franchisors require a transfer fee to be paid to the franchisor when a franchise is transferred from one individual or entity to another. This fee is meant to offset the franchisor’s internal administrative costs of the transfer and can be many thousands of dollars. Who pays – the seller or the buyer – is a point ...

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.

First Things First

In preparation for advertising your franchise for resale online, there are a few steps you should take to prepare for the sale.

Why Advertise on Franchise Resales

You want to advertise the sale of your franchise on as many online portals as you can to ensure the right buyer finds your listing.

For aspiring franchisors, one of the biggest and most stressful challenges is selling that first franchise. Here are five tips to make it easier

Selling your first franchise is a little like landing your first job — it’s all about getting someone to believe in you and to invest in you.

By Kerrie Kennedy

Selling your first franchise is a little like landing your first job — it’s all about getting someone to believe in you and to invest in you.

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, ...

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.

What is a right of first refusal?

Another transfer restriction common to many franchise agreements is a right of first refusal ("ROFR") for the franchisor to buy back the franchise. Essentially, this provision states that if the franchisee finds a bona fide purchaser, the franchisor can step in and buy the franchise on the same terms that were offered to the third-party buyer. ROFR or first refusal provisions can prove to be sticking points for potential buyers, who do not want to go through an extensive due diligence and financing processes only to have the franchise opportunity deal taken off of the table at the eleventh hour by the franchisor. Typically, where a ROFR provision is a concern, it can be proactively addressed so that all of the parties to the process are on the same page.

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 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.

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.

Who is Jeff Fabian?

Jeff Fabian is the owner of Fabian, LLC, a boutique intellectual property and business law firm serving new and established franchisors and prospective franchisees. Contact the firm directly at 410.908.0883 or [email protected]. You can also follow Jeff on Twitter @jsfabian.

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.

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 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.

Do franchisors pay transfer fees?

As far as I know, all franchisors require a transfer fee to be paid to the franchisor when a franchise is transferred from one individual or entity to another. This fee is meant to offset the franchisor’s internal administrative costs of the transfer and can be many thousands of dollars. Who pays – the seller or the buyer – is a point ...

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.