6 Things to Know When Reselling a Franchise

6 Things to Know When Reselling a Franchise

There are many benefits to franchising your business or becoming a franchise owner. However, one does not often hear about the next step: reselling a franchise. As an entrepreneur, it is not uncommon to be satisfied with accomplishing one goal and while constantly looking for new challenges. Your franchise business could have been a passion project, but your time to start your next project has arrived. The only problem is, where do you start? Transworld Business Advisors has extensive experience with franchises. We have compiled a list of six things to know when reselling a franchise.

  1. Contact Your Franchisor

The moment you bought a franchise, you became one half of a franchisor-franchisee relationship. Because of this, the first step is to call your franchisor –– there is no reason to keep your desire to resell a secret. During this step, you may ask them a series of questions:

a)      What are the transfer fees when I sell the franchise?

b)      What qualifications do I need to look for when choosing a buyer for the franchise resale?

c)       What rules of thumb do you use to value my franchise?

 In some cases, there are no fees, but when there are, it can cost anywhere from $1,000 to $30,000 to transfer ownership of the franchise. Speaking of the transfer, the next buyer must meet certain qualifications approved by the franchisor before a sale and transfer can be made. These qualifications often relate to credit score, net worth and experiences. This conversation is key before beginning the resale process.

  1. Review the Agreement

Secondly, it is not only wise but also important to review your franchise agreement. Transfer fees and other specifications will be outlined, which are important to note for future negotiations. All of your questions should be answered at this stage. Any further inquiries can be clarified by your business broker.

  1. Prepare for the Sale

Like any other business, your franchise needs a business valuation. A Transworld broker can assist you in getting your finances in order and determining the value of your business. Once completed, you can find a competitive, but accurate listing price. Not to mention, financial documents will be in question during the sale, so being more organized will not only be beneficial, but will prepare you to answer all of the buyer’s questions.

  1. Comprehensive Business Analysis

As mentioned above, it is important to understand the state of your business. Not only financially, but also the morale of your employees and the intangibles –– like customer loyalty and goodwill. Being a part of a franchise means your reputation precedes you, however, the success of your individual franchise can be determined by attributes like location and customer retention. This, along with other aspects of your business will be carefully analyzed by your broker to help you prepare for the listing.

  1. Negotiations with an NDA (Non-Disclosure Agreement)

The moment you are ready to list your franchise for sale, it is important to understand the value of anonymity. For one, you do not want competitors or employees to know you are selling your franchise. Transworld will prepare a non-disclosure agreement (NDA) for all participating parties, to protect you from leaked proprietary information. In addition, a sale might scare your staff into quitting, employees fear that when management changes their jobs could be in jeopardy. An NDA is vital for a successful resale.

  1. Close the Deal

Finally, after sifting through the offers, you may find yourself moments from closing a deal. At this point, your franchisor has approved the buyer and you are ready to transfer ownership to the next franchisee. Your business broker will help sort out the legal documents and even serve as a neutral location for signatures and deal closures.

Although you own a franchise business, a resale –– after a certain point –– is much like selling any small business. The key is to sort out financial documents, list at a competitive price, and have the guidance of a broker to find the right buyer. Transworld provides a network of vetted buyers to ease the process and sift through the fake offers. If you are interested in reselling your franchise, contact your local Transworld today for a free consultation!