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Franchise Advice


The NatWest bfa annual survey 2015 said: “Increasingly franchises are successful going concerns which are taken over by a new owner, rather than businesses started from scratch.” Be in no doubt that you are entirely free to sell when you wish.


If deliberating selling your franchise, you must contemplate the following:


1. Read your agreement first That way you can be ready for what is to come.


2. Enlist your franchisor Many franchisors have guidelines regarding a franchise for resale, which may be stipulated in the franchise agreement.


“Franchisors have the final say but cannot unreasonably withhold consent.”


3. Make sure your business is fit for sale


Check the premises and equipment, and make sure the records for the franchise are in order. The accounts should be up-to- date, as the sales price is usually based on a multiple of profits.


4. Why are you selling?


This is the most important question a potential franchisee will ask. A good franchisee owner will always look for the opportunity.


5. Be realistic Things to consider:


• A condition of bfa membership by a franchisor system is that the franchisee is able to sell the business on to a third party with the benefit of the goodwill derived from developing the business over time


• Some franchisors have a clause in their franchise agreement where they will ask for a fee on the sale of the business. The fee amount may be adjustable and dependent on the franchisor finding a buyer


• Often the franchisor will introduce a prospective buyer to the franchisee who is selling their business. However, the


responsibility of selling the business is down to the franchisee


• The franchisor has the right to reject a potential acquirer if they do not meet their current recruitment criteria. Franchisors have the final say but cannot unreasonably withhold consent


• Some franchisors include a clause in the agreement that enables them to have right of first refusal to purchase, and it will be clear that the terms must be those that apply in the open market


• There are specialist businesses in the market whose sole task is to help the exiting franchisee achieve a good outcome on selling


Keep in mind that what the franchise is worth to you – in terms of emotional value – may not match what the franchise business is worth on the market. Be prepared to negotiate if needed, and find out how much other franchise resales have sold for, but keep in mind that location and profits are major evaluating factors.


6. Marketing approach In most circumstances, the franchisor will assist you in selling your franchise. They may already have someone on their waiting list. If this is not the case, you can either sell the franchise yourself using the many websites that have dedicated resales pages, your local regional newspaper, or use a specialist franchise resale consultant.


July/August 2016 | BusinessFranchise.com | 23


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