Deciding to purchase or sell a franchise business can be an exciting opportunity. There are many different benefits afforded to an owner who decides to purchase an established franchise business.
One of the biggest of these is that it is easier to begin the process of owning the business sooner rather than later. This is because much of the leg work in the establishment of the national brand has already occurred by the time the person steps into the business to manage it.
However, it is important to be mindful of some of the potential pitfalls when selling a franchise business. Overlooking some of these obstacles and pitfalls can be problematic, especially if you are not working with an experienced business broker.
Some of the biggest benefits of purchasing a franchise business include a system for operating the business is already in place, clear training and support, and favorable name recognition for the brand.
Both buyer and seller, however, should be aware of some of the potential issues associated with selling a franchise business long before the closing paperwork is signed. There are two critical documents that emerge in a franchise situation. The first of these is one that the seller previously signed, which is known as the franchise agreement.
This indicates what the franchise fees are for the business, when that existing agreement expires, and any transfer fees for selling the franchise.
The buyer should be aware of the terms that he or she will get when the business is sold. The other key document that emerges when selling a franchise is the franchise disclosure document. This document is mandated by law and contains a great deal of information about the bigger business franchise.
Certain states require franchises to register directly with the state and to make these FDDs available online. Some of the most common issues that emerge when selling a franchise business include:
- These buyers typically do not pay cash for a business.
- Unqualified buyers since the franchisor must both approve the buyer and the buyer must complete comprehensive training at the location named by the franchisor.
- Using a franchiser to sell the business can be the conflict of interest.
- Unqualified advisors, such as failing to bring in the right people to advise you professionally.
- Transfer fees, which can go as high as 10% of the sale price.
The seller should be familiar with the process of deciding at the outset of the sale, who will pay what and market the business for sale with this information. Plenty of issues can also hold up a sale even after the buyer and seller have been able to overcome some of these key challenges. These can include problems with negotiations and many more. At any time that a problem emerges with regard to the ongoing business for sale, an experienced and dedicated business broker can be very helpful for navigating these roadblocks. Website Closers can help you through the process with ease and with a personal touch.