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Posted on July 24, 2009

Contributed by Joe D. Robertson

Selling A Franchise? Keep The Franchisor Involved!


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.

"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."

About The Author:  Joe D. Robertson, CBB is the broker / owner of Southern California Business Broker. Joe has over eighteen years of experience owning, operating and selling successful businesses. Joe can be reach by phone at 949-307-3817.

Watch for more blog posts / articles from me in the future!

See all contributions from Joe D. Robertson

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Comments:

I know about a franchise owner who said it is "none of the franchisor's business" that he wanted to sell. He didn't expect them to cooperate with him and didn't tell anyone till the last minute. Franchisor okay was the only contingency left. He didn't expect them to cooperate and he was right. There was bad blood between them so the company made things harder for him. I thought they'd work with him and bend over backwards just to get rid of him.

Posted by: Chaz A.

Are franchisors easy to work with in the economic crisis or is it more difficult to get them to cooperate with you? I have heard both ways. One franchisee with a pretty well known restaurant told me the company has laid off a bunch of people so it's hard to get any help on something you need. And somebody else who has a franchise in auto tune-ups said that his franchisor knows times are tough for the stores, and they are trying to be very helpful. Like if someone in the system does a promotion and it seems to work out well, the company will tell all the franchisees about it.

Posted by: Ron F.

The advantage of getting the franchisor involved when you first decide to sell is that you can find out how to price the business because you'll learn what other franchisees have sold for. And you can get advice about preparing the business to maximize its appeal and its selling price. The disadvantage is if the franchise rep is not discreet, the word will get out to employees and customers before you are ready for the public to know the business is being sold.

Posted by: Jeff K.

It’s kind of silly not to work closely with the franchisor when you go to sell. In most cases they can be pretty helpful. Not only is the franchise company likely to have a buyer for you, the area rep may be willing to help you qualify people, help to sell people on the franchise, give you printed materials about the company to pass along, and so forth.

Posted by: Alex Max


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