9 Steps To Buy and Sell a Franchised Business

Buying and selling Franchised business can be done in many ways. A business can be posted for sale on Facebook or through an agent, or the owner will sell it to one of the staff members. All transactions must be informed by the Franchisee and approved by the Franchisor. Another point to pay attention to is the Lease Assignment when buying and selling a business. In Today’s Blog we are going to explain Steps to Buy & Sell Franchised Business. Let’s Explore these points.  

1. Find a business in your industry and conduct due diligence. What is due diligence?

It is a process of reviewing the business operation in the last 2 years including financial, customer data based, demographic, staffing and operation styles.

2. Making contact and asking questions.

After your research about the business in question, contact the owner to express your interest. This step is important, since you have done all the research, it’s time to find out if what you have found is correct? Asking questions to know more about the business what you may have missed? After all, you can determine if the price you have for this business is reasonable or it needs adjustment.

3. Working in the business for free.

Yes, you heard me, for free. When buying a business, especially franchised business, it is important that you work in the business before buying a business to understand how it works.

4. Negotiating on price

This step can be done by a business consultant, business adviser, accountant or the buyers themselves if they believe they have sufficient understanding about the market and the industry.

5. Sale contracts

It is a mutual agreement as to which party will issue the sale of a business contract, it can be the buyer or the seller. The Sale of business contract should be reviewed and prepared by the professionals. Yes, nothing can stop you buying and selling a business on a hand written piece of paper or just doing it orally, but be aware of your right and your business won’t be protected if anything goes astray.

6. Seek for the Franchisor’s approval

After the sale of a business contract is signed and the deposit is paid, the seller can seek for the approval from the Franchisor. This normally means the buyer will have to fill in the application form and start the new process as per the Franchisor’s request. Fees and charges will be determined by the Franchisor.

7. Seek for the Lessor’s approval

If there is a lease in the business, the buyer and sellers of the business must ask for the consent from the Lessor before the handover date. The Lessor will also ask for an application forms and the buyers will likely be responsible for all legal cost of the process.

8. Settlement statement and handover date.

After receiving the consent from both the Franchisor and the Lessor, the sale of business is considered 90% complete. The buyer and seller can now discuss the handover date and inform all parties. The settlement statement can be prepared by either parties, its purpose is to ensure the payments are recorded correctly.

9. Important Notes

It is important that the sale of business is conducted genuinely from both parties and all the finance is recorded clearly and transparently. Without consent from the Lessor and the Franchisor, the sale of a franchised business cannot go through.

If you find yourself in this situation, contact Brydan Woods today for solution.