Franchise Resales

What happens when an existing franchisee decides to sell?  Franchisees don’t actually “own” the franchised business.  In fact, they own the “assets” of the business only.  The Franchisor gave them the “rights” to use the name, marks, the operating manuals, the “system”, however the franchisee does not “own” these items.  In effect, they rent them from the franchisor during the term of the franchise agreement.

When existing businesses sell, the price is typically based on a multiple of normalized annual earnings or cash flow.  Another common term used in the financial industry is EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).

Typically, franchisees want to re-coup every dollar they put into the business and then some.  Often this is possible assuming the business is profitable and has a track record.  Two positives franchisees sometimes overlook:

  1. Franchised businesses that are profitable will typically bring a higher multiple of cash flow in the sales price.
  2. There is intangible value (because it’s a franchise) that can add to the sales price.

But on the flip side, an existing franchised business (in the eyes of the buyer who is looking to buy a stream of income) is an existing business that happens to be a franchise.  Therefore, unless the business is profitable, this buyer will probably not wish to pursue it.

The franchise minded buyer (wants less risk and likes the franchise model) will like the fact that the current franchisee has done most of the hardest work in ramping up the business.  The existing franchised business will be very appealing to this buyer assuming he/she has a personality that matches the business model.

So what happens if the business is not yet profitable or is just now at break-even?  The franchisee will have to decide how motivated he/she is to sell those assets.  Obviously, since there’s no stream of income, the price will need to attract the franchise minded buyer.  Will this buyer pay you a price higher than what it would cost to put in a new franchise?  Possibly, however several factors enter into the buyer’s decision:

  1. Is this franchise territory more desirable than an available new territory?
  2. How ramped up is this business?  How large a database?
  3. How much marketing has been done to create branding in the territory?

In the event the current franchisee has a “short fuse” on when they wish to sell – price may have to be lower than turnkey cost of a new franchise in that system.

PROCESS OF SELLING AN EXISTING FRANCHISE

Selling an existing franchised business is much like selling any other business with these differences:

  • Franchised businesses have some intangible value because of the franchise itself
  • Franchised businesses will often bring a higher multiple in pricing
  • Successful franchised business owners have the advantage of attracting both cash flow buyers and new franchise prospects.

There are many complex steps in selling your business.  Anne Barr, Franchise Opportunity Specialist, can walk you through all the steps so you can concentrate on running your business, while we concentrate on finding you the best qualified prospect.  Let us minimize your stress by assisting you in locating the person with the best personality traits, skills and financial capability to take over your business.

  • Exclusive Listing Agreement
  • Proper Documentation
    • Financials
    • Tax Returns
    • Copies of Contracts, Leases, etc.
  • Valuation and Pricing
    • Market Comparables
    • Intangible Values
  • Completion of Professional Marketing Package
  • Finding the Right Match for Your Business (business owners, downsized executives, franchise prospects)
  • Assessing the Qualifications of Buyer Prospects (which ones match your Franchisor’s profile)
  • Educating prospects about the franchise industry & process
  • Coaching prospects through the research and due diligence process
  • Purchase Agreement
  • Negotiations
  • Acceptance of Purchase Agreement
  • Financing Assistance for the Buyer
  • Franchisor Approval
  • Lease Assignments
  • Closing

BUYING AN EXISTING FRANCHISED BUSINESS

We have established franchised businesses for sale. If you would like additional information on any of these opportunities, please contact Anne Barr at 972-783-1662 or email abarr@bizdealmaker.com.

Contact Us – (972) 783-1662

Recent Transactions

  • Kwik Kar Auto Center
  • Home Health Business
  • Custom Cabinet Manufacturer
  • Upscale Dog Grooming
  • Kwik Kopy Business Center
  • Hamburger Restaurant
  • View More »

    “They know what it takes for a buyer to secure financing, and assist in getting the required paperwork to the lender. If I ever decide to sell my business, I know where I am going for my broker.”

    Wesley HFranchise Buyer

    Anne Barr - Business Broker

    ANNE BARR

    Anne Barr has over 35 years experience in sales and marketing, six years as a franchisee. She has assisted over 486 business owners and purchasers to achieve their goals in career change, transition and exit strategy.

    She holds the designation of Certified Franchise Executive (CFE) from the International Franchise Association, Certified Franchise Consultant from the International Franchise Professionals Group, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne also holds a Texas Real Estate License.

    Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right “fit” in business ownership.

    Rochelle O'Brien - Professional Business Broker

    ROCHELLE O’BRIEN

    Rochelle O’Brien has over 17 years experience in marketing with 14 years specifically in the franchise / business brokerage industries. She has a Bachelors degree in Marketing and Management Information Systems from Kansas State University. Rochelle has been awarded the Certified Business Intermediary (CBI) designation through the International Business Brokers Association and holds her Texas real estate license.

    Call us today to discuss buying or selling a business in the greater Dallas / Fort Worth Metroplex
    (972) 783-1662

    Affiliations