An important part of selling an ongoing franchise is to keep the franchisor involved in the process so that there are no suprises or challanges when it comes to complete the deal. Chatting with
Joe Robertson with Southern California Business Brokers about this topic he emailed me what he thought were points that franchisees and other
business brokers should consider when
selling a franchise business:
"If you own a franchise and are ready to sell, do not forget about the franchisor because they are an important part of selling your business. Much like your landlord, you will need to work with them throughout the deal. Ultimately, you will need the franchisors approval of your buyer before the sale can be completed. It is always a smart policy to try to keep a positive relationship with the franchisor.
Once you are ready to sell, you or your broker should contact your local franchise representative. Let them know that you are ready to sell and they may be able to pass on buyers interested in purchasing your business.
The following are questions you will want to ask your Franchisor before you put your business up for sale:
1. Is there a transfer fee? If so what is the cost and what does it include?
2. What does the franchise look for in qualifying a potential buyer? (amount of needed capital, assets, credit score, etc.)
3. What is the process of qualifying a potential buyer? (interview, application)
4. How long does the qualification process take?
5. What are the details of the franchise agreement? (renewal fees, royalty fees, terms of current contract)
6. Are there any upgrades or improvements that the franchise will require the new owner to complete after the sale? If so, what is the estimated cost of them?
Make sure you have your copy of the current franchise agreement to provide to your broker. Have the general details of the agreement, but remember that buyers will want to review the entire contract during due diligence.
Finally, be sure to keep your franchisor “in the loop” as you proceed with the sale. Their help in the sale is essential to a smooth deal."
Joe Robertson can be reached at 949-307-3817.
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