Standing Out in a Crowd: How to Sell Your Franchise Business

September 11, 2020

There are over 750,000 franchises in the USA of which 7-10% are being resold at any given time. Quick math suggests there are 52,500 to 75,000 franchises for sale in the USA right now. How many are being sold in your city?

In the hyper-competitive world of franchising - it can be hard to sell your franchise.

The good news? There are a few simple things you can do to improve your chances of a successful sale. Let's break those down:

You Are Not A Golden Goose

It is important to remember that most buyers have several options available to them. For example, let's look at the options a restaurant-seeking buyer has available to them:

  1. Buy your franchise
  2. Buy a competing franchise
  3. Buy an independent restaurant
  4. Start a new franchise
  5. Stary an independent restaurant
  6. Don't buy anything

Sellers often forget #6 - nobody needs to buy a business. But many people want to buy a business. Would you like to get the highest price for your business? Make buyers feel they need to buy your business. This starts with leaving a good first impression.

Why First Impressions Matter

Think back to when you were first applying to be a franchisee. Before applying, you probably did some prep work. Similar to applying for a new job, you were trying to make the best first impression. This holds true when selling a business. Except the party you are trying to impress is a buyer, who has even more money at risk.

So what can you do to impress possible buyers?

1) Clean-up your books
  • If you don't have good accounting systems in place - buyers won't be able to understand your books. This makes them unsure of what they are even buying.
  • While counterintuitive, increasing your taxes in the years before a business sale is a good thing. As this better reflects how much money your business actually makes.
2) Determine a realistic price for your business
  • Setting an accurate asking price is important. Especially given that 29% of businesses fail to sell because of valuation gaps.
  • The benefit of re-selling a franchise is that valuation multiples are generally well-known. This makes it easier to know if you are in the ballpark or not.
  • Tools like PriceBuilder, make it easy to determine the value of your business.
3) Create a professional buyers package
  • After signing an NDA, experienced buyers will expect a 'Confidential Information Memorandum (CIM)'. CIMs provide a comprehensive overview of a company's operations. This includes financial statements, sales & marketing strategy, the roles of your employees, etc.
  • When well-prepared, CIMs provide all the information a buyer needs to submit an offer.
  • To create branded CIMs, Franchises use our CIMBuilder tool. See if your franchise is a partner.

How to Get in Front of Buyers

Okay so you have cleaned up your finances, prepared your CIM, and determined an asking price. It is time for the difficult part - making your business stand-out from the crowd. To do this, you need a robust marketing strategy.

To certain extent, selling a business is a numbers game. As you are far more likely to sell your business if you get it in front of 100 buyers opposed to 3.

You can improve your chances by marketing through multiple channels. First, speak with your Franchisor to see if they have any buyers in your area. Although it is more likely these buyers are looking for new franchise opportunities.

Once you get approval from your franchise, there are many others ways to advertise:

  1. Advertise on popular business-for-sale sites (Businessesforsale.com, BizBuySell.com, etc.)
  2. Work with a business broker
  3. See if any local accountants, lawyers, and/or bankers have clients looking to buy a business
  4. Talk to other local franchisees. Successful franchisees are often interested in expanding. Even if they own a franchise under a different brand.

Keep in mind that selling a business takes time (typical timeframe is 8-12 months).

Selling a business can be hard. But by following these steps you can drastically improve your chances of success.

Thinking about selling? 

Talk to us about our options for Franchise Resales. We work with Franchisors to create their own custom-branded application.

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Paratus demystifies the business-for-sale process, making it easy for owners to value and sell their business.
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