The One Thing Franchise Consultants Never Tell You

The number one reason people contact our franchise consultants isn’t to ask us where to buy a cup of coffee or how much is too much to spend on advertising. It’s not even, “What do I tell my wife/husband/friends/parents who don’t want me to ‘waste’ money by becoming a franchise owner?” (A serious question we get asked over and over again). The number one reason most people inquire about franchises is… drum roll please… To find out if they can sell their business for top dollar. They are looking for the quickest way to dump their business at the highest possible price without getting into any personal trouble with Uncle. So let me be perfectly clear: Selling your business is not how you make money owning a franchise. You don’t read that in any of the franchise books or presentations you get sent, do you? Here’s why…

The Franchise Industry Is Changing Fast

 

As I’ve written before , thanks to dramatic changes in the economy and due to increased scrutiny by consumer rights groups, the entire industry has changed significantly over the past few years. Compared to when Mike Southon was promoting his book about buying a successful fast food franchise back in 2006, today everything is much more difficult for small business owners, including potential franchisees who are looking at buying an established operation. That should be good news for everyone because it should drive prices up. But it’s not good news for many of the people who are looking for help selling their business because it’s making it more difficult to find buyers.

You Have To Do Your Homework First, Because Not All Franchises Are Equal & Prices Have Changed

For starters, you can’t necessarily sell your business for top dollar by calling us first and getting our advice on how to make your business more attractive. Many factors go into what a potential buyer is willing to pay (and what you should ask for). We’re happy to give initial advice over the phone but we’re not franchise brokers who will promise you millions of dollars if you sign up with our company or offload your headache onto someone else. Most importantly, if your asking price isn’t competitive within the marketplace, no one will consider buying it.

Secondly, you can’t necessarily dump your tired old business and buy a shiny new franchise for pennies on the dollar just because you’ve been in operations for decades or have lots of loyal customers. Many buyers will only purchase the assets (e.g., equipment, name, inventory) and not assume any liabilities such as leases and contracts. If you want to sell the entire company with all the headaches that come with it — including real estate — we’ll be happy to help you but we’d also recommend interviewing several different brokers so you get multiple quotes from competing firms. Finally, if you haven’t kept up with changing market prices and conditions through the years, chances are good your asking price is out of date and needs to be adjusted.

Conclusion:

please don’t get us wrong… Selling your business can definitely have its rewards. But if you want to sell the entire company, the price has to be right for both sides because there are no guarantees in life or business. If you’re trying to dump an old franchise so you can buy a new one at lower cost, it’s not such a simple formula and we think you should talk with several different brokers before making any decisions. And if all of this is really about selling out and retiring young (which isn’t necessarily terrible idea), we know some attorneys who will love picking up the phone when you call…

 

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