How to Find Franchise Buyers
If you’ve decided to sell your existing franchise, connecting with the right buyers is essential. Whether you're selling multiple units or looking to sell a single franchise, the process requires strategic outreach and targeted efforts.
As you get started, you’ll need to consider how to find and engage qualified franchise buyers to achieve a seamless transition.
How to Prepare a Franchise for Sale
Getting ready to sell your franchise requires many different steps. Throughout the process, remember to be diligent and compliant with the terms you agreed to in the original franchise agreement. The franchise agreement will outline any specific requirements or restrictions related to selling the franchise. As the franchise owner, you’ll need to pay attention to special clauses related to the transfer of ownership, approvals, and any fees associated with the sale.
Notifying and getting approval from the franchisor is one of the first steps. The franchisor should be aware of your intentions to sell before the sale. Not only do they have the right to approve or reject the potential buyer, but they may want to buy it back themselves. Allowing them the right of first refusal can benefit both parties.
You’ll also need to understand your obligations. Some franchise agreements require the new owner to undergo extensive training. As you identify and qualify buyers, make sure they’re willing to comply with those expectations. Finally, ensure that all financial obligations to the franchisor are fulfilled before the sale is finalized. This can include outstanding royalty payments, franchise fees, or any other financial commitments outlined in the franchise agreement.
Create a List of Potential Buyers
Marketing the sale of your business begins with targeting qualified buyers. You can start by creating a list of buyers in the following categories:
1. The Franchisor
Offer the franchisor the right of first refusal. Allowing them the opportunity to acquire the franchise may align with their strategic goals. They may also see it as an opportunity to ensure a smooth transition for their franchise brand.
2. Existing Franchisees
Other business owners within the same franchise system might be interested in expanding their operations and incorporating the real estate of your franchise location into their network.
3. Entrepreneurs and Investors
Identify individuals or investment groups interested in franchise opportunities. Entrepreneurs are already used to being their own boss, and investors have the knowledge to pursue business ownership.
4. Industry Contacts and Competitors
Industry contacts and competitors may recognize the value in acquiring your established franchise to expand their market share or diversify their business.
5. Existing Employees
Key employees and managers with a deep understanding of the business may be interested in taking over the franchise, especially if they have been with the business for a considerable time.
6. Family Members
Selling the franchise to a family member can be a viable option if they have the skills and interest in running the business.
Qualify Potential Franchisees
It’s important to do due diligence as you qualify potential buyers.
- Assess their experience. Review the prospective franchisee’s professional background, industry experience and knowledge, and any relevant skills, especially management experience. Ask about their ability to communicate and work collaboratively.
- Evaluate their financial capability. Assess liquid assets, net worth, and access to capital and loans to ensure they have the financial capacity to invest in and sustain the business.
- Challenge their market expertise. Assess the candidate's understanding of the local market, audience, competition, and local business regulations.
- Gauge their sales and marketing knowledge. Understand their ability to promote the brand effectively within the territory.
- Understand their motivation. The franchise business model is built on standardized processes. Is this the right franchise for them? How do their long-term goals align with the system? Ask the questions to prove that potential franchisees will adhere to the franchisor's guidelines.
- Perform legal and regulatory compliance. Conduct background checks to ensure that potential franchisees have a clean record. Ensure that they review the franchise disclosure document (FDD) and are willing to comply with the terms and conditions.
Use Business-For-Sale Marketplaces
Garner the attention of prospective buyers by listing the franchise on reputable business-for-sale marketplaces.
The listing needs to be compelling with professional images, and it needs to help pre-qualify prospects. List key business aspects, including relevant financial data, franchise history, and growth potential. Provide detailed information about the franchise system and list any unique selling points.
As leads reach out, be responsive to their interest and maintain confidentiality.
Use a Franchise Broker
Engaging a franchise broker or a franchise consultant for the sale of your existing business comes with several advantages.
Access to a Network of Buyers
Franchise brokers have an established network of potential buyers and can help make referrals. Focusing on buyers pursuing franchise ownership can expedite the qualification and sales process.
Expertise in Franchise Sales
Franchise brokers are highly specialized with a proven track record and in-depth franchise industry knowledge. Not only can they help find you a buyer, but they can consult with you through the complex valuation process, connect you with a franchise attorney, and ensure compliance with franchise regulations and laws.
Negotiation Skills and Deal Structuring
Expert negotiation skills are favorable if you need to secure the sale. Franchise experts can help structure deals that align with your objectives and increase the likelihood of a successful sale.
Check out BizBuySell’s Broker Directory to find a business broker experienced in franchise resales to help you find buyers for your franchise and open an account to list your franchise for sale.