Eight Things to Consider Before Selling Your Franchise Interest

Selling a franchise is not the same as selling an independent business.  When you sell a franchise interest, you are just changing the ownership interest (for example, one Dunkin Donuts store out of the franchise of stores). The new owner and the franchisee must agree on a sale number. The prospective owner must also prove to the franchisor that the owner possesses the capital and the experience to run the franchise interest. 

Your first step before selling your franchise interest is to consult a business law attorney who is familiar with the process. With that said, here are ​eight items to consider as you begin the process of selling:

• Franchise Agreement – The franchise agreement is a legal contract.  You are better off having it reviewed by a business law attorney.  There are requirements that the franchisor will require when you are selling your franchise interest.  A business law attorney with experience in the area of franchises is the best fit for this job.
• Franchisor – Independent business owners enjoy having no one above them in the chain of command.  However, owning a franchise interest means there is a franchisor that must be informed when you decide to sell. You must coordinate with the franchisor throughout the process. 
• Pre-Sale – This item is really its own checklist. Have one ready with the following questions: What is the market value of the business? What is a fair price? Do you have three or more years of financials for a prospective buyer to look over? With these questions answered, you can put together a sale package that includes a confidentiality agreement drafted by your business law attorney. Anyone who signs one is required to keep your business financials confidential.
• Employees – It is only fair to let your employees know you are selling the business. At the very least, you can assure them that you will do everything in your power to see that they keep their jobs after the sale, as long as they understand you cannot make any promises.
• Market – If you are looking for another activity to share with your attorney, scoping out the market beforehand is a good idea. See if there are other franchise interests like yours that have been sold close to your area. Find out what they sold for.
• Advertise – You must promote and advertise that your business is for sale. Here are some suggestions. Hire a broker who specializes in selling franchises. Place a classified ad in a trade magazine, one specific to your type of franchise. Look into listing your business with your Chamber of Commerce or Economic Development Center.
• Financing – Surely, you remember what it was like to be a new franchise owner. You probably also realize how tough it is to obtain financing in today’s economy. You might want to offer seller financing as part of the deal.
• Training – Another huge help to a new owner is training. Stay on an extra week and help out. You can even charge a fee. The franchisor will certainly appreciate it if you make sure that the new buyer understands the franchise rules.  It is possible that the franchisor may require this. It will make the entire process go smoother.

Once again, the involvement of a business law attorney is essential to the process of selling your franchise interest. He or she will draft the sale documents and will assist you step by step through the process. If you are thinking of selling your franchise, call ​this office and make an appointment.