What Do You Need to Know Before You Put Up Your Franchise for Sale?

What Do You Need to Know Before You Put Up Your Franchise for Sale?

There are many diverse reasons you might want to put up your franchise for sale. For example, one common reason is that a franchisee is having trouble operating the business. Other times, franchisees just feel that the time is right to sell and that they can reap the financial rewards for doing so. Whatever your reasons for selling, there are key factors you should consider before listing your franchise for sale.

What is in Your Franchise Agreement?

Your franchise sale will be controlled by the transfer provision found in your franchise agreement. It is vital that you keep this fact in mind. You will find that your franchise agreement does regulate your ability to sell in some manner. It is quite common for the franchisor to have numerous rules in place to govern your sale.

The reason for this is quite simple in that the franchisor typically wants to approve the new franchisee. Your franchisor wants to be certain that the buyer can successfully operate the franchise.

The party interested in your franchise for sale to must sign the franchise agreement. Keep in mind that this agreement may have evolved or changed since you initially signed. The franchisee you sell your franchise to must also usually waive potential lawsuits against the franchisor.

What are the Financial Details?

There are other variables as well. One key variable to keep in mind is that if the buyer is financing a major portion of the price, then the franchisor is very likely to be concerned and with good reason. After all, the franchisor wants to make sure that your buyer will be able to pay any fees, bills or unexpected expenses that may arise.

The financial details of your sale will typically have to be approved by your franchisor. A variable that can surprise many is that franchisor transfer fees may also be involved. It is possible that your franchisor will also want to meet with the party looking to purchase your franchise for sale.

Whether or not the issues outlined above ultimately interfere with the sale of a franchise depends on a case-by-case basis. Every franchise and every situation is different.

Will You Really Be Off the Hook After Your Sale?

Another potential problem that may occur is that the franchisor may want you to take back control of the franchise if the new owner has outstanding obligations. In fact, it is possible that even after you sell your franchise, you may have to continue meeting pre-existing obligations.

Do You Have a Non-Compete Clause?

Keep in mind that your non-complete clause may play a role in your future plans. Once you sign over your franchise for sale, you likely will not be able to draw on any of your previous customers or business relationships when starting up a new business.

Thinking through these variables is a prudent step towards making the sale of your franchise a smooth one. Ultimately, it is important to remember that your franchisor will have a say on the final sale of your business.

Investing the time to work with a business broker will help you smoothly navigate the often complicated process of selling your franchise. At the end of the day, a business broker understands what franchisors expect and is invaluable in assisting franchisees.

Copyright: Strategic Business Brokers Group