Selling a franchise works much like selling any small business, with one added step: the franchisor usually has to approve the buyer and the transfer. Start by reading the transfer terms in your franchise agreement, then get your records in order, talk to the brand early, and find a buyer the brand will approve. Preparing a year or more ahead gives you time to fix what a buyer would question.
GrowthHook helps owners think through an exit, with Business Exit Advisors, our strategic partner, bringing brokerage and valuation services.
What does the franchisor have to approve?
Most franchise agreements require the franchisor's consent before you transfer the business. The terms are in your agreement and summarized in Item 17 of the brand's Franchise Disclosure Document. Common conditions include:
- The buyer meets the brand's qualifications and completes its training.
- Your obligations to the brand, such as fees, are current.
- A transfer fee is paid.
- The buyer signs the brand's current franchise agreement, which may differ from yours.
- The location is updated to the brand's current standards.
- The brand has a right of first refusal, meaning it can buy the business on the same terms.
Read these terms with your attorney before you list the business or talk price with anyone.
What will a buyer want to see?
| What a buyer asks for | Why it matters |
|---|---|
| Several years of financial statements and tax returns | The basis for what the business is worth |
| The lease and its remaining term | Whether the location can transfer, and at what cost |
| Staff and who manages day to day | Whether the business runs without you |
| Equipment and its condition | What the buyer will have to replace or upgrade |
| Time left on the franchise agreement | How long the buyer can operate before renewal |
| Customer and sales trends | Whether the business is growing, steady or declining |
How do you prepare to sell?
- Read your agreement. Know the transfer conditions, fees and any right of first refusal.
- Clean up the books. Separate business and personal expenses, and keep records a buyer's accountant can follow.
- Make yourself less essential. A manager who runs the day-to-day makes the business easier to sell.
- Fix what a buyer would question. Deferred maintenance, an expiring lease or a required remodel.
- Talk to the franchisor. Some brands help find buyers, and some keep a list of people interested in resales.
- Get a valuation from a qualified professional before you set a price.
- Keep it confidential. Staff, customers and competitors should not hear about it before you are ready.
Who helps you sell?
Your franchise attorney reviews the transfer terms and the sale documents. Your accountant prepares the financial records and advises on tax. A business broker, or the franchisor's resale program, can help market the business and find buyers.
Hook Alliance acts as an advisor, opportunity originator and strategic connector. When a sale calls for a licensed business broker, we bring Business Exit Advisors in and work alongside them. We are not a registered broker-dealer, investment banker, law firm or licensed financial advisor, and we do not give legal, tax or investment advice or provide formal valuations.
Could growing first make more sense?
Sometimes. If you are not sure you are ready, read Not ready to sell? Ways to grow your business first.
Frequently asked questions
Can I sell my franchise to anyone I choose?
Usually not without the franchisor's approval. Most agreements let the brand approve or refuse the buyer.
What is a right of first refusal?
A right for the franchisor to buy your business on the same terms a buyer has offered. Check whether your agreement includes one.
How long does it take to sell a franchise?
It varies with the business, the brand's approval process and the buyer's financing. Preparing early helps.
Will the buyer keep my franchise agreement?
Often the buyer signs the brand's current agreement, which may have different terms. Your agreement explains what applies.
This article is general information, not legal, tax or financial advice. Review your franchise agreement and any sale with a franchise attorney and accountant.
Thinking about an exit? Request a confidential conversation or start with FranchiseHook.