Dru recently had a conversation with Sydney Business Broker Michael Vitullo about the ins and outs of selling a franchise business in Australia. Michael has been part of multiple transactions where the business being transferred was a franchise and has some key learnings for prospective sellers. They were:

Strategy – Clearly State The Advantages/Disadvantages

There are some clear benefits and drawbacks for buyers comparing purchasing a franchise or an independent business. An example of a benefit being instant brand recognition, a drawback being less flexibility in how they operate. To avoid wasting time, it is important to clearly communicate these pros and cons with interested parties so that they can quickly assess if they are a match or not.

Important Consideration – Franchisor Transfer Process

Every franchisor has different conditions when one of their franchises changes ownership. It is critical that sellers communicate with their franchisor before going to market so that they know what the obligations will be for both parties.

An example of a common condition for buyers is that they undertake some training with the franchisor. Anything like this needs to be clearly communicated upfront with interested buyers so that they can better assess the opportunity in front of them. Any additional franchisor costs for training etc. need to be considered and rolled into a total entry cost number which can then be used to create a fair valuation.

The final step of transacting a franchise deal can be the most difficult, with many franchisors wanting to assess their new potential franchisee before green lighting any transfer. There’s nothing worse than getting a buyer through all the hoops to stumble at this final hard to control hurdle. It’s an added layer of complexity versus transacting an independent business that requires an experienced hand and an alignment of everyone’s best interests.

Buyer Profile & Demand

Interest in franchise businesses remains strong, particularly from overseas buyers who may be looking to purchase a business for the sake of a visa and are more attracted to the support and security that a franchise provides. Michael has found that service based franchise operations in particular are experiencing strong demand, particularly those with a broad customer base and product offering.

Do you operate a franchise business that you are interested in taking to market? We’d love to help. Please book in a complementary and confidential discussion with our expert team today.