Franchise Resale Stress? What Smart Owners Need to Know Now

Selling an independent business is rarely simple. If you want to sell your business, and it happens to be a franchise, you’ll encounter additional hurdles. The transaction has to get approved by the franchisor, and you may be subject to resale restrictions. 

As a small to mid-sized business owner, you are already juggling operations and staffing, all while trying to stay profitable until the transaction is finished. 

With over 830,000 estimated franchise establishments in the United States, there is clearly a huge market for these businesses. This has made franchise resales both common and highly competitive. 

If you want to sell your business, you need to know what you are up against. Here are common barriers and some best practices for overcoming them. 

Common Franchise Sale Challenges

Challenges you may face during the selling process include the following: 

Franchisor Approval Requirements

Most franchise systems must approve the buyer. Find out what requirements your franchisor imposes so you can keep deals from falling through at the last minute. Even if you know what the requirements are, finding someone who meets them can be tedious and time-consuming. 

Transfer Fees and Contract Terms

Many franchise agreements include transfer fees or other terms that could impact your bottom line. Other terms may impose costly requirements on buyers, such as forcing them to invest in upgrades or training. 

Pricing Misconceptions

Many owners overestimate value based on brand recognition. Your valuation needs to be based on market data and the financial performance of the business. 

Buyer Qualification Gaps

Even strong buyers can be rejected if they don’t meet the franchisor’s financial or operational standards. That can be deflating, especially if you spent months searching for a buyer. If a buyer gets rejected, you’ll have to start back at square one. 

Best Practices for a Smooth Resale

A successful franchise resale starts with preparation. Before you list your business for sale, you need to: 

Get an Accurate Valuation

Before you sell your business, you need to know what it’s worth. This is where many franchisees stumble, as they place too much emphasis on sentiment or brand recognition. You need to base your value on real numbers. 

Not sure where to start? Check out our business valuation calculator to see what your business might be worth. 

Clean Up Your Financials 

Potential buyers want to know that your house is in order, especially when it comes to financial documents. Organized statements and operational records give buyers the confidence they need to move forward with a deal. Clean records also promote smooth, timely due diligence, meaning you may be able to get to the closing table sooner. 

Be Honest and Start the Conversation From the Top Down

If you are thinking about selling your franchise, you need to communicate your intentions with your franchisor early. Tell them your plans and review any requirements they may impose. A candid conversation can help you avoid surprises later in the process and allow you to part ways on positive terms. On the other hand, engaging with your franchisor later can add unnecessary friction to your transaction. 

Work With Franchise-Savvy Brokers

Franchise resale stress doesn’t have to define your exit experience. When you partner with Sunbelt Business Brokers, you gain a team that specializes in helping small and medium-sized business owners sell your business with confidence. Our brokers know how to position value and stay relentlessly proactive throughout the process. Contact us to learn more.