Selling a franchise is a big decision. It’s an investment that could potentially pay off in the long run, but there are a lot of factors to consider before making such a large financial commitment.
If you’re thinking about selling your business franchise, here are some things you should know before taking the plunge.
1) What Is The Market Like?
The first thing you need to do when considering whether or not to sell your franchise is to determine what kind of market exists for it. If you have a product with limited appeal and no competition, then maybe it makes sense to sell out now while you can still make money from it. However, if you think you might be able to expand into new markets, then you may want to wait until after you’ve made those expansions.
2) How Much Will I Get For My Investment?
When deciding how much you’ll get paid for your franchise, keep in mind that this will depend on several different variables:
• Location – Where does your franchise operate? Do you own land where you can build a location? Or do you lease space at another company’s facility? This affects both the value of your property as well as the amount of rent you’d receive per month.
• Product/Service – Does your franchise offer something unique? Are people willing to pay more than they would for other franchises? These questions affect the price you can expect to receive for your franchise.
3) Can I Afford To Pay Off Debt And Save Money At The Same Time?
It’s important to remember that paying down debt doesn’t necessarily mean saving money. In fact, many times, it means spending less money because you don’t owe anything anymore! So, if you plan to use any proceeds from the sale of your franchise toward reducing your debts, you must also factor in the cost of doing so.
4) Who Would Buy My Franchise?
This question isn’t always easy to answer. After all, who knows exactly which companies are looking to buy businesses these days? But, one way to find potential buyers is by contacting local franchisors. They often list their available properties online, so take advantage of this resource. Another option is to contact existing franchisees directly. Many of them will be happy to tell you why they chose to purchase their particular brand instead of others.
5) Should I Sell Now Or Wait Until Later?
There are pros and cons to each approach. On the plus side, waiting gives you time to see if interest grows among prospective buyers. Also, if you decide to hold onto your franchise longer, you won’t lose any equity in the event that you choose to sell later.
On the downside, however, holding onto your franchise past its peak sales period could result in lower profits. Plus, if you wait too long, you risk losing out on future opportunities to sell your franchise.
6) When Should I Start Looking For A Potential Buyer?
You shouldn’t start actively seeking offers right away. Instead, try to gauge demand over the next few months. Then, once you feel like you understand the current state of affairs, you can begin reaching out to interested parties.
7) What Is An Offer Like?
You probably already know that most sellers ask for between 10% and 20% of the total franchise fee upfront. That said, you should never agree to give someone 100%. Even though he or she has offered you a fair deal, you still retain ownership rights to your franchise. If you accept his or her offer without getting everything agreed upon upfront, then you may end up having to fight with him or her when trying to close the transaction.
8) How Much Will Closing Costs Be?
Closing costs vary depending on whether you want to go through a traditional bank loan or finance your acquisition using private financing options. However, regardless of what method you choose, closing costs typically include legal fees, title insurance, appraisals, etc.
9) Do I Have Any Other Options?
Yes, you do have several alternatives besides selling your franchise outright. One possibility is to partner with another company. This arrangement allows both partners to share revenue while maintaining separate brands.
Another alternative is to form a joint venture with another individual or group. With this type of partnership, two individuals split the workload and responsibilities associated with running the business.
10) Am I Ready To Make Such A Big Decision?
It sounds scary at first, but it doesn’t need to be. In fact, many people make good money from owning franchises. The key is finding the right opportunity. Once you’ve done that, you’ll realize how much fun it really is!
Selling a franchise is a big decision. If you’re thinking about selling your franchise, our professional brokers at Transworld Business Advisors can help. Our team of experts can provide you with a free consultation to determine whether you should sell your franchise. We can also help you find the right buyer for your franchise. We can help you sell your franchise quickly and easily. Contact us today to learn more about our services!
