SELLING A FRANCHISE
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Sell A Franchise
When selling a franchise business, the first instinct for many is to contact a franchise business broker. What most people don’t know realize is that they can do it themselves and save tens of thousands of dollars. National Franchise Resales provides you with the steps in the process to sell your franchise and the professional resources you will need to assist you with selling a franchise. In addition, we are the only franchise resale website that will list your business and generate leads for you for FREE!
Steps To Selling A Franchise
To set yourself apart from most franchise sellers, you should take the time to document everything you can about the franchise business as an overview you can provide to potential buyers. This overview should provide the buyer with information such as 1) Why are you selling the Fanchise Business 2) When was the Franchise business established 3) What are the strengths of the business 4) What challenges need to be addressed to assist the new owner in improving the business 5) What have the annual sales been during your ownership 6) What has the cash flow been during each of those years 7) What assets come with the purchase of the business 8) What are the terms of the lease if applicable 9) How much are you asking for the franchise business 10) Will you be providing any training/ support after the sale of the franchise. Of course you can also add any other pertinent information that you deem necessary. The potential buyer will appreciate the insight you are giving them and you will be providing them with a tool that most sellers will not have to offer.
Once you list your franchise business for sale, it is imperative that you set aside some time every day to follow up with these inquiries. When someone inquires about your business there is a high level of enthusiasm on their part. Make sure that your are responding to these inquiries as quickly as possible to start the franchise selling process. If it takes you days or weeks to get back to them they will lose their enthusiasm and may have already found another opportunity.
The next thing you will want to do is make sure your franchise business is clean and organized. Whether it is retail space, a vehicle, equipment, or something else, you will want to give the potential buyer a great first impression.
The most common issue that potential buyers encounter is being able to get their hands on the financials for the franchise business of interest. After all, this is the most important factor for them when considering when buying a franchise. Therefore, it is imperative that you have an accurate and up-to-date set of financial statements for their review. We recommend at least the last 3 years of financials but more is better in this case. If you haven’t done a good job of keeping your financials organized and need assistance with this, we suggest you reach out to one of our accounting partners to help prepare a clean and thorough set of financials. If you are reluctant to share this information with each potential buyer, you should contact a lawyer from our professional resources page to draw up a Non-Disclosure Agreement. This will help protect the privacy of this information.
Franchise Business Value
The hardest part of selling a franchise is defining a price. After years of hard work and investing a good amount of money into your business, there is no doubt an emotional connection that will influence this decision. In order to find the fair market value and eliminate your emotions, it is best to leave this process to a professional. A valuation expert knows how to sell a franchise and will provide an objective assessment of your franchise business by studying the market, reviewing your financials, valuing your assets, and considering other facets of your business depending on the industry in which you are involved. The valuation expert will then provide you with a report and a fair market value for your business. This is a great tool to have when selling your business. By investing the money and being able to provide a report to a potential buyer, you will already be separating yourself from other sellers competing for the same buyer. Rarely does a seller have such a valuable tool to provide to interested parties. Another benefit to the valuation is that it eliminates or at least lessens the ability for the buyer to negotiate the price. If you are presenting the buyer with a price that has been determined to be the fair market value and a report that supports that value, the buyer has no grounds for negotiation. One last benefit that most people do not consider is the ability for the buyer to get financed. If a buyer applies for a loan and has documentation to show that they are paying a fair market value for your business, this improves their chances of being approved. Please visit our Professional Resources page to request a free consultation from a valuation expert. It is not an expensive service and this tool will greatly increase your chances of a quicker sell of your franchise.
The next step is for you to contact a lawyer to assist you with selling your franchise business. Our legal partners can prepare a Non-Disclosure Agreement, Letter of Intent (LOI), purchase agreement, and any other legal document needed based on the type of business you are selling. The attorney knows how to sell a franchise and will also hold your hand through the entire franchise selling process and assist you with closing the deal. For a transaction that has no real estate and no intricacies, you could pay as little as just a couple of thousand dollars for legal representation. Compare that to the 10% the broker would collect.
Get The Word Out
In many cases the seller of a franchise business wants to keep the sell a secret from their employees. What they don’t realize is that those employees may be the best source of lead generation they can get. The employees are familiar with the business, hopefully have some passion for the business, and in some cases may have a financial backer who could assist them with purchasing the business. At the very least, the employees will spread the word which could lead to interest from someone in your community. A digital way on how to sell your franchise is to utilize social media to get the word out. If your friends and family hear how successful you have been and how much you have enjoyed the business, they may have an interest in taking over. The advice we would give you is don’t keep it a secret. Tell everyone you know to increase the odds of you being able to sell a franchise.
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DISCLAIMER: The information provided on this website, including in any attachments and/or links contained in this website, is provided AS-IS without representation or warranty of any kind, express or implied National Franchise Resales, or any of its representatives. Prospective buyers are encouraged to seek legal, tax, and accounting advice from licensed provider(s) prior to making any investment decision. Nothing on this website, including any attachments and/or links contained on this website, constitutes tax, accounting and/or legal advice.