So You Want to SELL a Franchise?

Business Selling a Franchise

How do you sell a Franchise idea?

Franchise owners often have an advantage when selling their business, because a franchise is naturally monitored and audited by the franchisor. There is thus less uncertainty regarding revenues and expenses. Prospective buyers can also expand their due diligence by reaching out to the franchisor and other franchisees in the system, who often serve as a defacto marketplace for re-sales themselves. While the sales process time consuming and varies significantly from franchise to franchise, you should generally consider the following steps when selling your franchise:

  • Contact Your Franchisor. Some franchisors will help with the resale and transfer. You will also need the franchisor’s approval of the prospective buyer. You should thus check your franchise agreement and ask the franchisor for the specific sale and transfer requirements such as, for example, applicable transfer fees and necessary qualifications of the prospective buyer.
  • Valuation Process & Due Diligence. You should discuss the valuation of your business with an accountant, so that you may realistically sell for the highest possible sales price. For an accurate valuation, your business must have properly managed books and records, and all of its bank accounts should be reconciled with its bank statements, tax reports, and yearly or quarterly financial statements. These items will also be provided to any prospective buyer for review during the due diligence phase, so it is wise to compile all such information beforehand.
  • Marketing Your Franchise for Sale. After you have gotten an accurate valuation of your business and put together all relevant business records, statements, reports, books, and other information, you will have to market your business for sale to find potential buyers. Some franchisors will help you find a buyer. Business brokers may also be helpful, however, they often specialize in selling new, not existing or operating, franchises.
  • Negotiations and Closing. Once you have found interested buyers, you should consult with an attorney regarding the negotiation and closing of the sale. You should not hand over any of your business records before the prospective buyer has signed a non-disclosure agreement. When you have reached an agreement, you and the buyer will have to execute various agreements to set forth the terms of the sale, effectively transfer the franchise, and properly close the transaction. An attorney can assist in negotiating favorable terms and you should have an attorney prepare all of the necessary agreements.
  • Post-Closing Obligations. Notwithstanding the successful sale of your franchise, you will still be bound by some of the provisions of your franchise agreement, such as, for example, non-compete restrictions. You should therefore consult with an attorney to ascertain which obligations and restrictions will survive the sale of your business and for how long they will remain in effect.

EPGD Business Law is located in beautiful Coral Gables. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Founding partner Eric Gros-Dubois established EPGD Business Law in 2013. With over a decade of experience expanding the firm and leading it to its current success, Eric now primarily manages the corporate division of EPGD. Given Eric’s educational background, holding both a JD and MBA, combined with his own unique experience of starting a business from scratch and growing it to a multi-million dollar firm, he brings a specialized and invaluable perspective to those seeking legal assistance for themselves and their businesses. Having now instilled his same values in our team of skilled corporate associates, Eric leads a firm that is always ready, willing, and equipped to handle any and every legal matter that a business owner may have.

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*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.
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