Selling your Franchise

Ways to Sell your Franchise
There are 4 main ways to sell your franchise business.

  1. Sell it by working with the franchisor.
  2. Sell it by using a business broker.
  3. Look at selling it yourself.
  4. Sell only part of the business.

1. Sell it by Working with the Franchisor.
This method is where your franchisor helps you sell the business. Find out what the franchise agreement has to say about the duties and obligations that your franchisor might have when you want to sell the franchise. The agreement may set out a specific type of process that must be followed in order to obtain full approval from the franchisor. This is probably the first option because often the franchisor would have details of interested parties who have approached them looking for a business from that particular franchise.

If this is the case then it is a simple matter of a franchisor contacting the party that enquired and you may have a sale completed quite quickly. Some franchisors would repurchase the franchise themselves and run it under management so they can pick up the profit. You would have to talk to your franchisor to make sure you have the right to sell your franchise and whether the agreement gives them the right for first refusal.

2. Sell it By Using a Business Broker.
The second way to sell your franchise is to work through a business broker. You would need to find a business broker that has handled other franchise sales because the process might be a little bit different from selling a normal business. You would need to decide whether the broker is given an exclusive agency or whether they are given a general agency (where more than one broker is selling it) and you would have to agree on such matters as promotion costs and the rate of commission that would be payable on the sale. If you can, find a broker or a broking firm that has a good track record as far as franchise sales are concerned.

You may also be able to link up with a broker who specialises in franchise sales and therefore would have a client base of interested buyers that may be keen on looking at what you have to offer. Brokers would also have the advantage in that they may introduce someone who has enquired about other businesses and possibly have never considered looking at a franchise to buy. The broker would therefore channel their interest towards your franchise business and a sale may result.

It is a good idea to work through brokers because they would be able to qualify the buyers (check them out) and ensure that everything is handled confidentially. This aspect of confidentiality is very important so that you do not cause problems with your staff or with your suppliers or with your competitors.

3. Selling the Franchise Yourself.
Another way to complete the sales process is to sell it yourself. If this is your choice then it would be good for you to gain a bit of knowledge about the selling process and the procedures involved. A good feature of this is that no one has the passion for your business like you have and this would show in your negotiations.

You would have to arrive at a fair price for your franchise and your franchisor may be able to help in that area. It may be a good idea to talk with your accountant first as well as your lawyer before you proceed. You have to understand that selling it yourself would involve you in a lot more work and this could take you away from your main responsibility of running your business profitably. If you succeed then you would save yourself a lot of money because you would not have to pay brokers fees. You may even save yourself dollars in reduced advertising costs.

Unless you have some knowledge of accounting, finance and confidence in your ability to negotiate with others, then this option is probably one that you should bypass.

4. Sell Part of the Franchise.
The final method is to look at selling part of your franchise business. This would come about when you own two or three different outlets and you may decide to reduce down your work involvement by selling one or two outlets and keeping the remaining one. It can also arise in a situation where you have a large territory under your franchise and you decide to sell of part of that territory so that your work involvement can be reduced.

You may also have the right under your franchise agreement to sub-franchise part of your business or territory so this is an option if you want to either reduce your workload or cash in part of the business. The choices of method you have therefore are - working through the franchisor or see a business broker or sell it yourself.