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Usually, at some point there comes a time to sell your business. If it is an independent establishment, you are left completely on your own – and while this degree of freedom can be daunting at first, it also provides you with an unlimited array of possibilities. But what if you want to undertake a franchise resale? Franchises have one significant difference from independent businesses – franchisees are bound by franchise agreements, which in some cases can limit their freedom of action quite notably. Usually, a franchise resale is not an exception to this rule. Yet, virtually every franchisee can resell their business – but it is essential to know several important tenets.

Is a Franchisee Allowed To Resell Their Franchise?
A short answer is yes – if such a procedure is in compliance with the franchise agreement, a franchisee has a right to a franchise resale. However, “compliance” is the key word here. Naturally, the sale of an independent business involves far fewer concerns in comparison to what is common among franchise resales. This is perfectly understandable, as a franchise resale involves at least three parties – the franchisor, the franchisee, and the potential buyer.

The franchise agreement plays the most important role in such transactions. Usually, it provides quite a comprehensive outline of what constitutes a franchise resale, and what is needed to carry out such a transfer. This is why your first step when thinking about selling your franchise should involve a look at the franchise agreement. Specifically, read the clauses related to transfer and assignment – in all likelihood, you will find some surprises there. First and foremost, you need to understand that you do not have an absolute legal right to resell a franchised business without consulting with your franchisor first – except in very rare cases, the agreement will include some clauses that the franchisor incorporated to protect itself from irresponsible or loss-making franchisees.

However, this should not scare you off. Most likely, you will just be required to submit a request concerning the franchise resale to the franchisor to approve, along with providing comprehensive information on a potential buyer, a draft sales agreement etc. Then, the franchisor will probably reserve a certain period of time to evaluate the proposal. There may be other requirements as well.

In more complex cases, the franchisor will want to put the potential buyer through the same application process that the regular franchisees face. Also possible is the Right of First Refusal provision, allowing the company itself to step in and buy the franchise. However, the ultimate reason for such precautions is the franchisor’s wish to keep your franchise operational and successful – therefore, do not be surprised if the company will scrutinize the proposed franchise resale agreement meticulously. For instance, the franchisor may even veto the resale if the price you have asked for is too high – the parent company may just be worried that a new buyer could face difficulties with the repayment of his or her loan.

How To Benefit Most From Franchise Resales?
Despite all the factors mentioned above, franchise resales, when done properly and in cooperation with the franchisor, can be a very rewarding endeavor. First, you need to make sure that it is the best time to resell your franchise. Are monthly sales figures positive? Is the market hot or cold? What are the most attractive features of your business? You need to be aware of these factors when announcing the franchise resale offer.

Second, do not hesitate to enlist help if you feel you might need it. The most reliable and easiest way is to ask your franchisor to assist with the franchise resale. The franchisor might not only help you with the evaluation of your business, but it might also have access to a network of potential buyers that may be more qualified and affluent than the ones you would be able to find yourself.

If assistance from the franchisor is not an option, you may hire an experienced business broker, who would also be able to assist with evaluating the franchise and finding a suitable buyer. However, you should expect to pay a fee or a certain percentage of the franchise resale price to the intermediary, be it the franchisor or a business broker. Yet, even with all the costs and effort taken into account, reselling a franchise at the right time can be a great business decision, don’t you agree?

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