Selling a Franchise: 10 Steps to Success

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Owning and running a franchise business can be great fun and, with a bit of work, extremely lucrative.

While this is very much the case, there may come a time when you decide that you’re ready for a new challenge, but what happens to your franchise business in this event?

You might, of course, decide to allow your employees to continue running your business for you. However, this does present a solution, and you’ll probably still need to be involved in the franchise to a certain extent.

You can also choose just to let your contract run its course and then elect not to renew, in which case the business is returned to the franchisor, though this may not be ideal after all of your hard work and investment.

One of the most common questions franchisors are asked is, Can I sell a franchise business?

The answer to this is yes and, in this article, we’ll take you through the 10 steps to successfully selling your franchise:

Step to success 1 – Check the fine print

Although it is possible to sell a franchise, your first task is to check your franchise agreement to ensure that there are no sneaky little clauses that dictate how and when you can sell.

In most cases, the franchisor won’t oppose a sale as they naturally prefer to have franchisees who are fully invested in the business but, it’s always a good idea to know exactly what’s in your agreement from the word go.

Step to success 2 – A word to the whys

Before steaming ahead with selling your franchise business, it’s time to take a close look at why you want to do so.

The most common reasons for selling a franchise are:

  • The business is not making the expected revenue
  • The running of the business is more demanding than expected
  • The franchisee is looking for a new project or business
  • The franchisee bought the franchise with the specific intention of selling it

Examining your reasons for selling the franchise will help you figure out if it’s the right decision and if so, it will help you determine a timeframe for the sale.

Step to success 3 – The numbers game

Before you even consider selling your franchise business, you’re going to need to know what it’s worth. Many different factors go into the mix here.

You will almost certainly be best served by finding a professional to evaluate the business within the current market accurately.

Step to success 4 – Be good on paper

You can’t possibly hope to make your business attractive to a buyer if you don’t have all your paperwork in order. Take the time to make sure that you have all of your documentation ready to present to a buyer and, your checklist should include:

  • Clear records of your business’s performance for the last two or three years
  • Employee records
  • Accounts
  • Franchise agreement
  • Contractual obligations
  • Lease agreements for any hired equipment or premises

Having all of this important paperwork to hand can significantly speed up a sale as well as helping the buyer to make the decision in the first place.

Step to success 5 – Keep your franchisor in the loop

Some franchisees choose to be secretive about their selling plans for fear of being penalised by the franchisor. Although this can happen, it’s rare.

As we’ve mentioned earlier, most franchisors will be extremely supportive of your decision and will offer advice and tips to make your sale go smoothly. For this reason, it’s a good idea to inform your franchisor once you’ve decided to sell and to keep them updated on your progress.

People Power

Step to success 6 – People power

Once you’ve decided to sell your franchise business, you’ll no doubt have a lot on your plate and, while selling the business is a personal decision, it’s one that affects other people – namely, your employees.

When beginning the process of selling your franchise, be sure to let your employees know what is happening and to assure them, where possible, that their jobs will remain safe. Keeping your employees informed will eliminate gossip within your business and keep them on your side as the process evolves.

Step to success 7 – Go pro

Even though you’ve been running your franchise business for a while and have a pretty good understanding of the ins and outs of the business, you may not necessarily have experience in selling a business.

In this instance, my top tip would be to get yourself a specialist franchise solicitor as they will advise you on the best way to go about the sale and help you navigate what can be quite a complex and time-consuming process. You may also want to enlist an accountant if you don’t already have one to ensure that all of your financial ducks are in a row as you go through the selling process.

Exit Strategy

Step to success 8 – Exit stage right

Now that you’re motoring toward selling your franchise, it’s time to create your exit strategy. Your strategy will include:

  • How you intend to find a buyer
  • How much you will accept for your business
  • The approximate date on which you wish the sale to be complete
  • Any special clauses, for example, retention of employees after the sale

This exit strategy will add structure to your sale and help it go as smoothly as possible within a set deadline.

Step to success 9 – A good buyer

Selling your franchise business does, of course, rely on finding a buyer for it and, you can do this in one of three ways:

Through your franchisor – It may be that your franchisor already has one or more potential buyers in your area on their books. In this case, you need to liaise closely with your franchisor to open a dialogue with the buyer to see if they’re the right fit for your business.

Through your own employees – You might find that your new buyer is, quite literally, right under your nose in the form of an employee. We’ve already mentioned the importance of letting your staff know that you’re considering selling the franchise. This is a good time to put out feelers to see if any of your employees would like to take over the business for themselves.

Through an advertising campaign – If neither of the above options are viable, then you’ll need to advertise your business for sale. This can be done through local newspapers, social media, online portals and trade magazines.

Once you have a shortlist of potential buyers, it’s important to meet with them to see if they’re a good fit. Additionally, your franchisor will also usually want to meet with them and, when it comes to making a final decision, this will usually be down to the franchisor.

Step to success 10 – Eyes on the prize

When selling your franchise business, you’ll be keeping a lot of balls in the air and, it’s important that you focus not just on the sale but also on the continued smooth running of the business. The last thing you want is for a sale to fall through because you’ve taken your eye off the ball and your business has started to decline.

Conclusion

Selling your franchise business is a great way to boost your bank account and leave you free to pursue other options. Just make sure that you tick all the right boxes along the way and, where necessary, seek professional help to help you navigate any bumps in the road.

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