The first place to start is your franchise agreement since this ought to contain the process and conditions that you will be expected to satisfy. At this point it would also be worth speaking to your franchisor to find out if they have a process they’d need you to follow – most established franchisors not only have a process in place but will also insist that you use their standard documentation which should save you time, money and hassle!
A successful exit is something that you need to plan for so there will be several stages to the sale process, namely:
- Preparation stage – this is the initial stage of planning, getting “your house in order”, making sure that your business is in the best position possible for a sale. Remember – your business will be valued depending not only on your revenue or turnover but also on how compliant it is with the franchisor’s system, with any external regulator (if applicable), whether you have the right staff in place. So, in order for you to achieve the best possible price, your business must be in the best possible shape and stay in that shape!
- Valuation and getting ready to sell – this is the stage where your business actually goes on the market!
- Finding the buyer – this may take time depending on the price you are looking to achieve. The higher the price the smaller is your pool of potential buyers. And don’t forget – they also need to want to buy a franchise and be approved by the franchisor.
- The legal process – once the buyer is found, this is when the legal process will commence. How long this takes will also be determined by whether or not the buyer is seeking external finance. A big part of this last step is due diligence. This is the part of the process where the buyer’s solicitor will be raising enquiries and the buyer will essentially (whether itself or using its advisors) will want to investigate and check out the state of your business. The more prepared you are for this, the quicker this stage can be completed. This requires you to be organised and to have documents in place ready to be reviewed.
The franchise agreement will set out what fees are payable by you to the franchisor on a sale – this usually will include a fee for approving the buyer, a commission if the buyer was introduced by the franchisor and a contribution towards the franchisor’s legal costs. You should factor these in when setting the sale price and budgeting for costs. In addition to these fees, there will also be your accountants’ fees, solicitors’ fees and the sale broker’s commission.
Selling a business does not happen overnight and what you get out is very much what you put in so start planning for the exit in good time to ensure that it is the exit that you want!
