Steps to Selling a Resale Franchise
If you’re already a franchise owner there will inevitably come a day when you begin to look for someone to take over the business. You can pass it down to someone in the family, and this is what a lot of franchisees do, but you might want to sell it instead. If you do this, you’ll need to know the steps involved in selling your franchise.
Step 1 – Notify the Franchisor
First off, you need to tell the franchisor about your intentions on selling. They may be able to help find a purchaser for your resale franchise. If they do, however, they will charge a commission.
Step 2 – Draft a Prospectus of Sale
The Prospectus of Sale is your sales document. It contains everything that a potential buyer would want to know about your business. Income statements, staff members, product and service descriptions, liabilities, franchise history, location description, staff bios, equipment, and an asking price.
Determining your asking price involves getting a proper business valuation done by an accountant. The prospectus must be accurate and detailed, so you might have a business broker assist you with writing it. A broker can also put the prospectus in the hands of potential buyers and take some of the stress and legwork out of the selling process.
Step 3 – Have the Purchaser to Sign a Non Disclosure Agreement
Once a purchaser is found, have them sign a Non Disclosure Agreement so they can’t share any confidential information. Once they’ve signed the NDA, give them the prospectus and wait for their decision and offer.You will have to go through a round of negotiations on the asking price as well. Don’t be too firm on your asking price. Be willing to bend a little and come to a mutually beneficial agreement.
Step 4 – Get Franchisor Approval on the Buyer
Whoever wishes to buy your resale franchise must be approved by the franchisor. They must also pass the training program. With this done, you can commence the legal aspects of transferring ownership.
Step 5 – Legally Transfer Ownership
To transfer ownership you’ll need an attorney to draft the proper documents. It’s best if you hire one with experience in franchise resales. You should also notify your suppliers about the ownership change so the new owner can set up their own accounts and get started right away.
Step 6 – Introduce the New Owner to the Staff
Once the funds have been transferred into your account, and all the legal paperwork is taken care of, ownership officially transfers to the new franchisee. If you’ve done everything right they should be able to start immediately, but it will be helpful to introduce him or her to the staff. This will make the transition smoother for all parties involved.
Selling a resale franchise can be stressful, but hopefully this article made it a little clearer. Enlist help from a good broker and attorney, and selling your franchise should be a profitable endeavor for both parties.