Bridging the Way BayState Business Brokers blog

Don’t Use the Franchisor to Resell a Franchise Business

by | Dec 13, 2011

We’ve sold a number of franchised businesses.  It’s not unusual that the owner lists it with us after having listed it for sale with the franchisor.  Maybe some franchisors successfully resell their franchises, but our experience is that this is the exception.  If you give it some thought, the reason is apparent. Think about who will actually sell the franchise – probably a local salesperson for the franchisor.  They usually get compensated based on total revenues of the franchise in their area.  It is not in their best interests to resell an existing franchise. It is hard to find qualified buyers for the franchise. When they have a buyerBuy existing franchise or start new one
who is interested in being a franchisee, they want them to open a new location to increase revenues.  If they sell them an existing franchise, they just trade dollars.

Another issue to consider is who is looking out for your best interests.  A business broker is paid on commission.  The more we get for your business, the more we earn.  But, a franchisor may have a conflict of interest.  You may be paying them to sell your business, but the buyer will be their customer in the future.  If the buyer pays more for your business, they may not be as able to afford upgrades to the franchise that the franchisor wants them to make.

We’ve re-sold many franchises.  We, as a business broker have buyers who want to buy a business that is up and running. A franchise re-sale is this.   A franchised business has other attractive features.  They have a track record. They have a structured business operation. They have ongoing training and support.  They are attractive businesses to many buyers.

There is one situation where the franchisor may be good for a resale – when the business is not doing well and in danger of failing.  In this situation, the franchisor is in danger of losing revenues so there is an incentive to sell an existing location.  On the other hand, if the business is not making much money, it is not attractive to the typical buyer that a business broker deals with.

If you are thinking of selling your franchise business, contact a business broker experienced in selling franchise businesses, not the franchisor.



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