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Franchise advice


Exit strategy


What happens at the end of your term and you want to sell the business? Nick Williams of Ashton Franchise Consulting explains franchise resales


I


t may seem odd to consider the end of a franchise business before you’ve even begun, but in fact it’s essential! Many franchisors will encourage you, as part of the bigger picture, to think about and anticipate what decisions you might make at this stage.


Some facts to consider: Ÿ A condition of bfa membership for franchise brands is that their franchisee should be able to sell the business on to a third party.


Ÿ Often the franchisor will introduce a prospective buyer to the franchisee who is selling their business, although the responsibility of selling the business is down to the franchisee. The franchisor does, however, have the right to reject a prospect if they do not meet their recruitment criteria. Franchisors have the final say but cannot unreasonably withhold consent. Some franchise agreements can carry a clause giving the franchisor right of first refusal to purchase – it will be clear that the terms must be those that apply in the open market.


Ÿ There are specialist consultants whose sole business is helping exiting franchisees achieve a good outcome on selling.


When you sell: next steps 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 resales, which may be stipulated in the franchise agreement. They will have conditions that the franchisee must meet, and they may assist in the sale.


3. Make sure your business is fit for sale – check


premises and equipment (if relevant), and make sure any records and accounts are in order and up to date, as the sales price may based on a multiple of profits.


4. Be prepared to answer the question: “Why are you selling?” This is the most important question a potential franchisee will ask. A good franchise owner will always look for the opportunity.


5. Be realistic. Understand 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 the selling price if necessary, and find out how much other franchise resales have sold for, but keep in mind that


location and profits are going to be major evaluating factors.


6. Finally, market your sale – 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. l


Nick Williams is managing consultant at Ashtons Franchising Consulting www.ashtonsfranchise.com


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