Sell Your Franchise
VALUE OF YOUR FRANCHISE
After marketing a franchise system successfully, a good franchisor will provide meaningful support and guidance to the new franchise partners on a consistent basis. The value of a franchise model should add up to much more than just the collection of a franchise fee. There should be substantial value 6 months, 2 years and even 10 years into the franchise relationship. Like any marketing or franchise sales model, it is much more efficient and profitable for a franchisor to retain happy, profitable franchisees than to continue going out and looking for new ones! The most important point we can stress to clients new to the franchise business is to never look at a franchise candidate for the value of the franchise fee, when and if that becomes your priority you will most likely have a short lifespan in the franchise marketplace.
TECHNOLOGY
In today’s business marketplace, it is essential that the tools and systems available to them from a technology standpoint. With ever-increasing technological capabilities and standards, great technology is available at a fraction of the price for most Franchisors. FMS has an array of partners and referrals for literally every element of franchise-related technology.
PROFESSIONALISM
Having spent a great deal of time working with entrepreneurs and working with literally hundreds of small business owners, we have seen our fair share of unprofessional business acumen. It is understandable that most small business people live life on their own terms and have a great deal of pride in what they have accomplished.
The tricky element of franchising is that now the business owner will need to be polished, professional and always have their best foot forward when dealing with franchisees. Franchise owners do not have the personality or the conviction that most entrepreneurs do, if they see a crack, they will assume the foundation is crumbling. As a Franchisor, you cannot overlook the “small stuff”.
CREATIVITY
A franchisee is continually reassessing their involvement in a franchise model. It is the never-ending question, “why am I paying for this?” As a franchisor, it is our responsibility to continually answer that question with new ideas, insightful business strategy and a helping hand when needed. The most effective franchise models are ones that are not a “one trick pony”.
The business is well developed, has a solid management team, is forward-thinking and provides an unending stream of innovative and out-of-the-box ideas to help the franchisees improve their bottom line and make their daily lives more efficient. McDonald’s is a wonderful example of this being done the right way.
PARTNERSHIPS
Everyone loves a discount and a “Friend in the Business”. It is a franchisor’s responsibility to find what needs the franchisees have on a regular basis, and then research what resources there are to assist with those needs. This comes by way of strategic partnerships and alliances with outside vendors and companies.
If a franchise system is utilizing a large number of printed materials, the franchisor better finds a quality printing partner for example. These partnerships and alliances are great ways to continually add value to the franchisee’s business and will undoubtedly harbour happy and secure franchisees.
COMMUNICATION
As a big powerful franchisor, it can sometimes be easy to forget about the other side of the coin. A franchisee typically will have a much different perspective on things than the franchisor does. Good franchise management requires looking at scenarios and situations from all angles and taking those into account when making impactful decisions.
Never assume that a franchisee is going to be “good to go” for the life of the term because their signature is on the agreement. Picking up the phone is a great way to manage relationships with franchisees.
For most franchise owners this reward means selling their franchise business to a new owner for the greatest price and at fair terms. But, once the decision to sell your franchise operation is made, it doesn’t take long for franchise owners to realize there are multiple paths to consider.
Franchises are often valued based on a multiple of revenue, cash flow, or earnings before interest, taxes, depreciation, and amortization (EBITDA). As the name implies, the EBITDA method adds back some expenses to the earnings total, and a franchise can be valued at 4 to 5 times EBITDA.
Sometimes a franchisee may want to sell their business before the term of their agreement is up. If selling before the agreement ends, the franchisee must ask the franchisor’s consent to sell. Franchisors cannot unreasonably withhold their consent to a transfer.