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Franchise Advice


How free are you to sell on your franchise business?


Nick Williams of Ashtons Franchise Consulting reveals what you need to consider for when it’s time to move on


T


his is a question frequently asked by would-be franchisees wondering exactly how


franchising works, and how one sided the franchisor/franchisee


relationship may prove to be when they want to move on. So we hope these words will give some direction and some clarity. Here are some facts to consider: • The vast majority of franchisors will both allow and enable franchise owners to sell their business


• A condition of British Franchise Association (bfa) membership by a franchisor system is that the franchisee is able to sell the business on to a third party with the benefi t 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 fi nding 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


64 | BusinessFranchise.com | September 2017


meet their current recruitment criteria. Franchisors have the fi nal say but cannot unreasonably withhold consent


• Some franchisors include a clause in the agreement that enables them to have right of fi rst 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


The 2015 bfa/NatWest Survey says,


increasingly, franchises are successful going concerns that 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 fi rst. That way you can be ready.


2. Enlist your franchisor. Many franchisors have guidelines regarding a franchise for resale. They’ll have conditions that the franchisee must meet, and may assist in the sale.


3. Make sure your business is fi t 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 profi ts.


4. Why are you selling? This is an important question a potential franchisee will ask.


5. Be realistic. 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 fi nd out how much other franchise resales have sold for.


6. Marketing. 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.


About the author Nick Williams is a managing


consultant at Ashtons Franchise Consulting


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