FRANCHISORS – SELLING YOUR FRANCHISE SYSTEM
Hot price or fire sale – which will it be?
Whilst profit multiples have reduced since the pre-GFC highs, many businesses and franchise systems are still seeing healthy prices achieved on sale.
Typically these are for businesses where:
- A solid foundation has been built with proper investment in quality systems, procedure and key people
- Sustainable growth and margins have been demonstrated
- Income from the franchisee network has grown beyond the critical mass point (royalties & fees cover fixed costs)
- There is still growth potential in the end customer market as well as the franchise network (not every territory has been sold)
- There is no or minimal cash leakage from the system – reporting and monitoring is strong with good sales disclosure by Franchisees
- Brand health is strong
It can take time to prepare for sale and find the right buyer. It is often worth starting to prepare several years in advance and identifying soft spots in the business so they can be addressed and contribute to maximising the sale price.
You also need to start identifying potential buyers. In the case of franchise systems this can often come from within as a Master Franchisee or syndicate of Franchisees may see an opportunity.
FRANCHISEES – SELLING YOUR BUSINESS
It is always easier to sell a well performing business than one that is struggling, so pick your timing on when to sell.
Existing Franchisees as well as new to the system candidates will be interested in a well run and profitable business and you can usually expect to obtain a decent premium.
However if your business is run down, unprofitable or part of a franchise system where many franchisees are struggling or lots of them are on the market – then you have problems. Recognise this risk and don’t let it get to that stage. Seek help from the Franchisor or professionals to remediate any problems and make your business attractive to a buyer.
The are many Franchise Brokers that can assist with listing for sale and some Franchisors operate an internal listing service as well. However prior to listing for sale it is often worth preparing for sale by addressing major problems, refreshing store appearance or making sure you have positive trend growth in our sales.
CEO Consulting brings big business skills & experience to Franchise clients to help prepare for sale and in some cases find buyers.