Marketing Your Franchise for Sale

So, you’ve decided to sell your franchise. After a very important detailed pre-sale analysis, what’s the next step?

Marketing the business to potential buyers.

The marketing process varies greatly from franchise to franchise, but as a general rule—first, consider who will be the target buyer. Below we discuss several target groups worth researching when marketing your franchise for sale.

Target Groups

Identifying target groups allows your business to focus marketing efforts on those people most likely to buy from you. In any business, it’s essential to know those to whom you’re marketing. And, as I’m sure you know, selling a franchise can be more complex than selling an independent business. Take a look at the target groups below and decide which route is best for you and your franchise.

Existing Franchisees

Are there other franchisees within the franchise who may be interested in purchasing? If so, this definitely should be considered, as the benefits of selling to an existing franchisee are many. For example, if the buyer is an existing franchisee, they have already been approved by the franchisor to operate the business. Also, no additional (or at least not much additional) training will be necessary. The existing franchisee has already learned the ins and outs of operating the franchise directly from the franchisor. And lastly, the franchisor will already have a relationship with the franchisee, so it makes the transition more familiar.

A good rule of thumb for selecting a franchisee is to start with any franchisee who is also a multi-unit operator. Contact them first, as it is more likely that if the franchisee has already expanded, they may be interested in expanding even further.

If no multi-owner franchisees within the system are interested in purchasing an additional franchise, consider if any local franchisees may wish to expand their territory. A franchisee owner in the same geographic location may have an easier time, and a local advantage, than franchisee owners outside of the geographical location.

A franchisor may appreciate this possibility because by contracting an existing franchisee, the franchisor can encourage franchisee growth and limit the number of franchisees to contract with.

The Franchisor

The franchisor is always involved in the process of selling the existing franchise, and it is in everyone’s best interest to involve the franchisor in the beginning stages. One risk for franchisees to watch out for is the franchisor’s right of first refusal. Asking the franchisor if they are interested in purchasing the business may alleviate this risk. If the franchisor is not interested, you may want to ask them to waive their right of first refusal. Some may oblige. Others may wish to wait until they receive more detailed information regarding the transaction. Another possibility may be that the franchisor may know another franchisee looking to expand ownership. They might give you this information freely, or they may require a finder’s fee. Either way, it will point you in the direction of a possible buyer.

BizBuySell.com

If selling to another franchisee or the franchisor is not an option, a sale may be an option through BizBuySell.com. Consider listing the business. You may have success. However, one downside to the site is that prospective purchasers can easily contact the seller, which may or may not be highly time-consuming as you vet potential prospects.

Business Brokers

Be aware that business brokers work in a mostly unregulated industry. In most states, almost anyone can be a business broker. Therefore, due diligence will definitely be necessary before hiring a broker. Your investigation should dig deep into the broker’s background, including education, career longevity, successes, failures, and transactional history. It is also a clever idea to check references. And do not forget to review the brokerage agreement in detail. Pay close attention to brokerage fees and the scope of services. Here are a few specific questions to keep in mind while vetting your broker:

• Does the broker help determine the business value?
• What is their plan, if any, to market the business?
• What materials will they need to market the business?
• What networks will they reach to market the business?
• Will they screen the prospective buyers?
• How will the broker conduct due diligence?
• Will the broker conduct negotiations of the sale?
• Will the broker help with the transfer of real estate?
• How will the broker maximize value for the seller?
• How exactly will the broker manage the deal?
• How will the broker guide the seller through the transaction?

Work with an Experienced Franchise Attorney

Marketing your franchise in preparation for selling involves many business considerations and legal issues. Hiring an experienced franchise attorney can help you understand the complexity of franchise law and ease you through the selling process. Contact us to schedule a consultation.