Selling a franchise business
If you are considering selling a franchise business, also known as a franchise resale, several avenues are available. You can list your franchise for sale on the market if your contract permits, sell it back to the franchisor, or sell it to an existing franchisee looking to expand their portfolio.
Running a franchise business can be highly rewarding as you can gain a stake in a recognised brand and join a community of franchisees united by a shared goal. Owning a franchise offers a unique opportunity to invest in an established brand with an existing customer base. The franchise industry is populated with unique and often rare commercial opportunities.
From well-established franchises with a global presence to locally renowned franchises with a regional footprint, franchises come in various forms that can attract a highly varied client base.
Where can I sell my franchise?
The terms of your franchise agreement will predominantly determine how you sell your franchise business. The resale process may be regulated by the franchisor to preserve the integrity of the franchise and the people behind the brand. On the other hand, some franchisors may provide free rein over the sale process and require little to no input throughout the sale process.
There are a variety of ways that you can sell your franchise, such as:
Sell your franchise through internal channels – The franchisor may provide an internal facility through which franchises can be listed for sale and marketed to existing and prospective franchisees. This can provide a direct gateway to interested buyers, which requires minimal effort and resources.
Sell your franchise to the franchisor – The franchisor may buy back the franchise and resell it. This can provide a straightforward exit with little time lost to the buyer search. If your contract contains a buy-back clause, you have a direct and non-negotiable exit route.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Sell your franchise through a business transfer agent
You may appoint a business transfer agent with experience selling franchises. When a franchise is due to be sold, the terms and conditions surrounding the potential sale must be navigated with care.
The franchisor may require the final stamp of approval, including assessing the character of the buyer and their industry expertise to ensure that both parties are a good match.
Sell your franchise privately
If you have an interested party lined up to buy your franchise, you may consider a private sale. You must appoint the relevant professionals, such as a solicitor, to perform due diligence and legally initiate the deal. A private business sale can be relatively low-cost as it eliminates the need for intermediaries, however, the franchisor may be involved.
What are the challenges of selling a franchise?
Selling a franchise is straightforward, however, you must comply with the terms and conditions of the franchise agreement. This may include restrictions and strict guidelines under which the franchise can be sold.
Franchisor approval – When selling a franchise, you may require approval from the franchisor to ensure the buyer is compatible with the brand. If the franchisor rejects a buyer because they are incompatible, your search for a buyer will continue.
Buy-back clause – The franchise agreement may contain a buy-back clause. If so, the franchisor reserves the right to buy back the business. This provides a guaranteed buyer and keeps the franchise under the wing of the franchisor.
Fees – If you sell your franchise, you may incur fees from the franchisor, such as a resale/transfer fee to cover the costs of facilitating the sale, any administrative work, due diligence and training for the new owner. You may incorporate these costs into the sale price.
What happens after you sell your franchise and how long does it take?
After you sell your franchise, the franchisor will usually guide the franchisee and provide them with the necessary training. A handover period may be negotiated to ensure a smooth transfer, after which your involvement with the franchise will cease. The duration of a franchise sale can vary as this mostly depends on the complexity of the sale, the speed of communication between all parties, and due diligence.
Expert advice selling a franchise
If you are considering selling your franchise, get in touch with a member of the Selling My Business team for expert advice. With over 60 years of experience, the SMB team are highly knowledgeable across a range of sectors, including selling franchises.
