Fees Involved in Selling a Resale Franchise
Selling a franchise isn’t just a matter of putting up an asking price and finding a buyer. There are also a number of other fees that should be factored into the total cost of selling the franchise. Considering all these and working them into your asking price will allow you to get a much better value on selling your resale franchise. Here are the fees you’ll need to look at.
The buyer won’t have to pay a franchise fee as they would when buying a new franchise, but will instead have to pay a transfer fee. In some cases the franchisor might charge this to the current franchisee instead. The purpose of this fee is to offset any administrative and support costs associated with bringing the new owner on board. It is most often a percentage based fee, but you might be able to negotiate this amount.
In the selling process, you will likely want to enlist the help of a business broker to help find a buyer. If they successfully find someone, and they buy the business, the broker will charge a fee for their service. This is called a success fee, and often is around 10 per cent of the agreed upon selling price. They might also charge other fees, so do your due diligence and read the brokerage agreement before you decide to work with anyone.
Transferring the business to a new owner involves legal paper work, and for this you will need a lawyer, preferably one with experience in franchise resales. There is no set fee here. It all depends on how long your work with the lawyer, and what their rates are. Generally speaking, you will want to set aside $2000 to $5000 for the attorney.
Part of the selling process is obtaining a business valuation, and to do this you’ll need a qualified accountant with experience in this area. Many factors are considered in determining what a business is worth including some that are hard to put a number on, so this is why you’ll want a pro.
Similar to lawyers, the fee depends largely on how long the accountant has to work on the valuation and what their rates are. Bigger businesses cost more to value. Fees can range anywhere from $500 at the low end, to over $30,000 at the high end. But, buyer beware. At the bottom end you likely aren’t getting great service. It’s usually around the $3000 mark that valuation packages start to get good.
The costs add up, but it’s important to find good help in the selling process. You’ll have the peace of mind in knowing that you’ve done it right, and get the best deal possible for your resale franchise.