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What are the best practices for transferring the franchise agreement and operations to the new owner?

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Franchise resale trends are changing the way franchisors and franchisees approach the transfer of ownership and operations. Whether you are looking to buy or sell a franchise, you need to know the best practices for a smooth and successful transition. In this article, we will cover six key aspects of franchise resale, from finding the right buyer or seller to negotiating the terms and conditions of the deal.

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1 Assess the market

Before you decide to buy or sell a franchise, you need to do some research on the market conditions and the demand for your industry and location. You can use online platforms, brokers, or industry associations to find out the average price, profitability, and growth potential of similar franchises. You also need to consider the competition, the customer base, and the local regulations that may affect your business.

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Joseph Imbrogno

Co-Founder JDI Cleaning Systems Inc.
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In my experience a potential franchisee needs to honestly exam themselves and their motivation for buying a franchise. A true self assessment of goals , management style and a suitable marketing orientated personality are some of the keys to success.

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Joel Libava

? Demystifying Franchise Buying | Author & Strategic Advisor | Over 24 Years Experience | Franchise Research Authority | Franchise Industry Writer | Classic Rock Lover
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One great way to assess your market area is to talk to a counselor at your local Small Business Development Center (SBDC). Mostly funded by the U.S. Small Business Administration, the staff offers free information on the locality you're thinking of opening a franchise business. Information on demographics, business trends, commercial real estate information and more can be had if you find a knowledgeable small business counselor. Just search online for the closest SBDC.

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2 Prepare the business

If you are selling a franchise, you need to make sure your business is in good shape and ready to attract buyers. This means keeping your financial records up to date, maintaining your equipment and inventory, and following the franchisor's standards and policies. You also need to review your franchise agreement and disclosure document to understand your rights and obligations regarding the resale. If you are buying a franchise, you need to do your due diligence and verify the information provided by the seller, such as the financial statements, the lease agreement, and the franchise contract.

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Steve Tucker

"From Launch to Exit: Shaping Success Stories | Steve Tucker, Your Business Growth and Exit Strategy Specialist"
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Selling starts with realizing that buyers aren't seeking jobs, they are seeking either lifestyle or a profit-producing asset. Buyers don't buy the self-employed, they are after the team, the client list, the assets and the intellectual property. Understand the buyer, have your financials cleaned up and ready to answer questions, not create them. If your team can't operate without you, then be transparent about it up front. Due diligence from the buyer may be light or it may be heavy. Be prepared for lots of questions from someone who hasn't lived your life in your business, but wants to know your story and everything about the operation. Seek advice from an expert who can assist in getting your business positioned well.

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3 Find the right match

One of the most important steps in franchise resale is finding the right buyer or seller for your business. You can use various methods to market your franchise, such as online listings, brokers, networks, or referrals. You can also contact the franchisor and ask for their assistance or approval. You need to screen the potential candidates and evaluate their qualifications, experience, and goals. You also need to build a rapport and trust with them and communicate your expectations and concerns.

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Ashley (Weis) Veltman

Corporate Counsel
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I would recommend not just looking at the business itself but also vet the franchisor - you’re essentially going into business with them and they will have a lot of control over your activities. Make sure the corporate vision, leadership team, and day to day practices align with your work and management style. Make sure they provide the support you need - especially during the transition period when you’re new to the business.

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4 Negotiate the deal

Once you have found the right match, you need to negotiate the terms and conditions of the deal. You need to agree on the price, the payment method, the closing date, and the contingencies. You also need to discuss the transfer of assets, liabilities, employees, and customers. You may need to involve your lawyer, accountant, or broker to help you with the legal and financial aspects of the deal. You also need to consult with the franchisor and get their consent and support for the resale.

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Joseph Imbrogno

Co-Founder JDI Cleaning Systems Inc.
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I agree with all the above stated steps and I would also suggest if possible, to have the new buyer work within the franchise for a period of time before the purchase is finalized. This may detract some candidates but it may also bring the deal over the finish line with a buyer who understands exactly what they are buying.

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5 Complete the training

Another key aspect of franchise resale is completing the training program provided by the franchisor. If you are selling a franchise, you need to ensure that the buyer receives the same level of training and support that you received when you joined the franchise. You may also need to provide some mentoring or coaching to help them with the transition. If you are buying a franchise, you need to complete the training and learn the skills, systems, and procedures of the franchise. You may also need to pay a training fee or a transfer fee to the franchisor.

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6 Finalize the paperwork

The last step in franchise resale is finalizing the paperwork and closing the deal. You need to sign the franchise agreement and the disclosure document, as well as any other contracts or documents required by the franchisor, the seller, or the buyer. You also need to pay any fees or taxes associated with the resale. You need to make sure that you have all the necessary licenses, permits, and insurance to operate the business. You also need to notify your employees, customers, suppliers, and other stakeholders about the change of ownership and operations.

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Andy Cheetham

CEO of UK Franchise Consultancy Lime Licensing Group. 6x franchisor, providing proven strategies that scale brands through franchising. Currently working from Estepona, Spain to establish Lime Licensing Group’s EU HQ.
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This only applies to countries where disclosure is required. In the U.K. there’s no disclosure but I would personally prefer it if there was a “lite” version. With respect to agreements in my view don’t transfer or novate, terminate one, and sign a new one with any supporting sale and purchase docs that make sense. Cleaner and simpler.

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What are the best practices for transferring the franchise agreement and operations to the new owner?

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3

4

5

6

1 Assess the market

2 Prepare the business

3 Find the right match

4 Negotiate the deal

5 Complete the training

6 Finalize the paperwork

Franchising

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What are the best practices for transferring the franchise agreement and operations to the new owner?

1

2

3

4

5

6

1 Assess the market

2 Prepare the business

3 Find the right match

4 Negotiate the deal

5 Complete the training

6 Finalize the paperwork

Franchising

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