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By Sanjeev Kumar
Founding Attorney

Becoming a franchise owner can be a great way for the entrepreneurial inclined to get involved in a business that already has so many of the basics established. If you are a franchise owner that is looking to move on to your next endeavor and sell your franchise, there are several steps you are going to need to take to set yourself up for a successful sale process. Here, we will discuss how to go about selling your franchise.

How to Sell Your Franchise

Once you have decided to sell your franchise, it is time to start preparing the franchise for sale. A good place to start is by contacting your franchisor. The fact that you are looking to sell your franchise need not be kept secret. A franchisor is likely no stranger to having franchises sold and will often offer assistance to see to it that the sale is successful. Franchisors have a vested interest in seeing that these sales are successful since a new franchisee coming into the system could help them see increased revenues. It also helps the franchisor in the way that it can avoid having to report a closed or terminated franchise. This type of thing would need to be reported in a Franchise Disclosure Document that will be reviewed by potential future buyers of the franchise.

Ask the franchisor about things like transfer fees associated with the sale of the franchise. Additionally, inquire as to what qualifications would be needed for a buyer of the franchise. The franchisor can also help you value your franchise so that you have an idea as to selling price.

Gather documentation about the franchise business. This should include an explanation as to why you are selling the franchise business as well as the strengths and challenges associated with franchise ownership. Documentation should also contain the annual sales of the franchise during your tenure as owner and the cash flow as well. You should also list the assets that are included in the purchase of the franchise and the terms of the lease, should this be applicable. All of this documentation should be presented in a readily acceptable format to any potential buyers of your franchise.

You will also want to market the sale of your franchise. There are online portals and proprietary databases for most business brokers in order to market a business for sale. In some cases, a franchisor may take various steps to market the sale of your franchise. Should this not be the case or should the franchisors’ efforts lack the aggressiveness often required for a successful business sale, then a business broker may be able to help you with this. Specific marketing efforts that should be made will vary from business to business and franchise to franchise. You may want to consider maximizing social media efforts to spread the word of the sale. Getting in touch with business owners in your market can also be helpful.

Once you have secured a buyer, it is time to negotiate and close the sale. Negotiating the price of a franchise is standard and you should be prepared for this. You are in a good position when selling a franchise because of the many benefits a franchise has to offer. Selling an independent business can be much more difficult as other businesses do not offer the support inherent in the franchise model.

Business Law Attorney

Selling a franchise is an important transaction to get right. At the Kumar Law Firm, we are here to provide franchise owners with sound legal counsel and support throughout the entire process. Contact us today.

About the Author
Sanjeev Kumar is the founder and principal at the Kumar Law Firm, which provides a wide range of legal services to entrepreneurs and business owners in the area of business & corporate law and intellectual property along with related areas of interest to clients such as business succession planning, wealth preservation through estate planning, and alternate dispute resolution.