Your Franchise Resale: A Step-by-Step Guide

Ready to transition to the next chapter of your life? Whether you’re looking to capitalize on your success or seeking a fresh start, this guide will help you confidently present your opportunity to potential buyers.


Part 1: Knowing Your Franchise & Identifying Your “Why”

  • Understand the System: Refresh your knowledge of the franchise system, including your brand’s strengths, target market, and ongoing support structure.
  • Gather Documentation: Compile financial statements, marketing materials, and any awards or recognition your business has received.
  • Identify & Address Your “Why”: Be clear on your motivations for selling. This will help you communicate your decision to potential buyers and frame it positively. Consider reasons like:
    • Retirement: Ready to enjoy the next stage of life.
    • Health Concerns: Need to slow down and take care of your health.
    • Lifestyle Change: Seeking a different geographic location or a schedule that allows for more flexibility.
    • Family Considerations: Changes in family dynamics or the need to prioritize family needs.
    • Skillset Mismatch: Recognize that the franchise might better fit someone with a different skill set than your own.
    • Business Growth: Recognizing that the business requires more capital than you can invest for optimal growth.
    • New Opportunity: Pursuing a different business venture or a career change.

Part 2: Understanding Financials & Valuation

  • Understand Your Financials: A clear understanding of your business finances is critical for achieving the best sale price. Calculating your Seller’s Discretionary Earnings (SDE) is essential, as it allows you to demonstrate the true earning potential of your business, leading to a potentially higher valuation. Analyze your current financial position, seek ways to enhance your performance, and don’t wait! The sooner you understand your SDE, the better prepared you’ll be for a successful sale. Download this Excel worksheet to calculate your business’s SDE.
  • Valuation Tools and Insights: BizBuySell offers a valuable toolbox for business owners curious about their franchise’s worth. The free BizWorth Calculator provides a quick and easy estimate, while the in-depth Business Valuation Report leverages a massive dataset for market insights. You may also want to consider hiring a professional valuation specialist to assess the value of your business. Their expertise can account for your franchise’s unique characteristics, potentially leading to a more precise valuation.
  • Bridging the Gap: Many aspiring entrepreneurs dream of owning a business, but turning that dream into reality often requires financing. Traditional bank loans, while familiar, can be a tough hurdle due to stricter credit score requirements and shorter repayment terms. SBA-guaranteed loans offer an alternative, but they come with challenges. The current interest rates, ranging from 13.5% to 16.5% as of June 2024, can significantly impact a business’s bottom line. And the stringent profitability requirements can unintentionally shut out promising young companies that haven’t yet reached their full earning potential. Enter seller financing, an established solution offering greater flexibility for buyers and sellers. By offering financing options or adjusting the asking price to make loan payments more affordable, sellers can attract a wider pool of qualified buyers and position each party to achieve the desired outcome.

Part 3: Preparing a Sales Presentation

  • Prepare a Sales Pitch: Craft a concise presentation that outlines the franchise opportunity, your location’s potential, the ideal buyer profile, and your reasons for selling. Highlight your potential by showcasing your established customer base, existing infrastructure, support from the franchise system, and any recent growth or improvements you’ve made.
  • Prepare a Selling Memo: Summarize key information for potential buyers, highlighting the opportunity and your asking price. Aim for 1-2 pages to pique initial interest. Use clear formatting and proofread carefully for a professional presentation. Here is an example of a Selling Memorandum to download as a Word document.
  • Practice Makes Perfect: Rehearse your presentation, focusing on clarity, enthusiasm, and anticipating potential buyer concerns.

Part 4: Engaging with the Buyer

  • Ask for a Signed NDA: If confidentiality is important, require a Non-Disclosure Agreement.
  • Write Personable Emails: Avoid long paragraphs and confusing words. Proofread your email.
  • Dress for Success: First impressions matter! Dress professionally and create a welcoming environment for the potential buyer.
  • Listen Actively: Respond to the buyer’s questions and tailor your responses to their needs and goals.
  • Be Enthusiastic: Focus on the opportunity. Explain how the franchise’s structure and your existing groundwork can pave the way for success with a new owner.
  • Be Transparent: Be honest about the realities of running the franchise, including the time commitment, operational challenges, and growth opportunities. Proactively address potential risks.

Part 5: Negotiations and Ownership Transition

  • Negotiate with Confidence: Your Resale Developer is your trusted partner in navigating a smooth and profitable resale experience. Acting as your advocate, they bridge the gap between buyers and sellers. Their exceptional communication skills make you feel heard, understood, and empowered throughout the process. Your Resale Developer helps navigate challenges and find win-win solutions by fostering open dialogue and expertly mediating discussions. This fosters trust, rapport, and a positive, stress-free environment, ultimately leading to a successful transaction.
  • Closing the Deal: Your Resale Developer streamlines the entire process, ensuring a smooth transition for you and the new owner. They handle everything from buyer education to paperwork, minimizing stress and maximizing your return.
  • Look to the Future! Selling your franchise opens new possibilities. Focus on what’s next for you and your goals.

Tip:

  • Stay Informed: Consider market conditions when setting a price. Factors like a weak economy or high interest rates can affect what buyers are willing or able to pay. Understanding market conditions will help you set a realistic and competitive price.
  • Stay in the Loop! Frequent communication with your Resale Developer can help identify any necessary adjustments to your resale strategy.