Selling Your Franchise Business

Jessica SarterFranchise Finance

Spadea Law

Where do I start?

The best exit strategy is one that has unfolded over the course of years.  It is never too early to begin an exit strategy.  You should have had one on the day you signed your franchise agreement.
In addition, you should review your goals annually.   Part of the review should focus on your exit timing.   If you think now is the time to exit then you must honestly ask yourself how motivated you really are to sell. Like any   big   project, you   will   need  to devote time, money and effort to do it properly.

Most small business owners, however, worry more about building their business than selling it and never plan  their  exit.    Be  assured, it’s never too late to develop a plan.  After making the decision that now is the time to exit you need to accomplish three critical things before placing your business on the market.

First Steps

First,  you  should  discuss  with  your  franchisor what your plans are.   All franchise relationships eventually come to an end.  You are not the first and  won’t  be  the  last  franchisee  to  exit  your system.    You  have  used  the  franchise  system, brand, and people to build your business.  Don’t be  afraid  to  use  them  to  exit.    They  have  a critical  interest  in  a  successful  transition.  Use them to help you close the deal.

Second, you need to gather documentation and clean up any inconsistencies, errors or omissions in your paperwork.   The list is extensive and you can  never  have  too  much  documentation. Buyers will take lack of documentation or documentation  they  have  to  fight  to  get  as  a sign of trouble and it will break down the trust between you.  Not only will it potentially affect your value, it will cause unnecessary delays.

In  a  small  business  transaction  the  trust between the buyer and seller is critical.  Without trust the deal will not happen.  The way you can build trust is by having all the documents readily available  for  any  buyer  who  is  serious  about making an offer. You need to tell a story to the buyer,  and  that  story  has  to  be  validated  by documentation.

Finally, you should see what if any financing will be available  for a buyer.   This  should  be done before you even list your business for sale.  Talk to your business broker, attorney or accountant to get some recommendations on financing sources  to pre‐qualify your business.   Not only will this make it easier to sell the business, it will be  a  great  reality  check  on  your  price.    If  the price can’t support financing, then maybe you shouldn’t sell until the business grows into the price you want.

Buyers of small businesses always have to make a  leap  of  faith,  similar  to  the  leap  you  made when you got into the business.   You need to convince the buyer why this transaction makes sense.     If  you  are  really  ready  to  sell,  have prepared  a  well  organized  and  thorough package,  and  have  pre‐qualified  your  business for financing, you will have a better chance of selling your business on your own terms.

Should I Use A Business Broker?    How Long Does It Take To Sell?  

View the entire Franchise Resale Bulletin to learn more.

 


About Spadea Lignana… (www.spadealaw.com)

The firm’s founding partners have decades of corporate franchising experience working as executives  for some of the most respected  brands in franchising.   As a boutique law firm with a primary  focus on transactions  in franchising  they have developed  a focused niche and  a  loyal  following  of  clients  looking  for  attorneys  to  get  deals  done  in  an  ever increasingly complex business environment.

Tom Spadea is an attorney with over 15 years of direct business experience.  He has been a business & franchise broker, entrepreneur and senior franchising executive at Rita’s Water Ice, Saladworks and the Huntington Learning Centers.  He is a hands on partner that negotiates franchisee retail leases, asset purchase agreements and has helped many entrepreneurs launch a new franchise system.

Nancy Lanard is an internationally known and respected attorney in the business and franchise worlds, starting as in-house counsel for three different international companies and then spending the last 20 years building a boutique law firm serving businesses, franchisees and franchisors all over the world.

Josh Lignana brings over 15 years of business experience, providing him with the valuable ability to understand the concerns of business people; a rare quality among attorneys.  His practice focus is on the intellectual property issues in franchising and the complex regulatory and registration requirements for franchisors.

All of the associates at the firm have years of experience in franchising, and as a group have negotiated hundreds of franchisee resales and retail leases.