Preparation is imperative when selling a franchise system. Your potential buyers will conduct exhaustive due diligence in search of problems that may kill the deal. If you don’t address these in advance, resolving them may take months and prevent you from selling your franchise.

Although your potential challenges will be as unique as your franchise system, some of the most common snags involve franchisee relations, systems and verified financial reporting data.

selling a franchise system

Identify and Correct Franchisor-Franchisee Problems

How well do you get along with your franchisees?

Before offering your franchise system for sale, consider your franchisor-franchisee relationships. If you have conflicts, this is the time to address and correct the issues. Buyers will be deterred by disgruntled franchisees, and ultimately, the brand will suffer.

Meet with each of your franchisees to discuss the potential for unresolved problems. Address any outstanding financial, territorial and personal franchisor disputes in advance of listing the business.

This will not only help you command top dollar in a sale, but it will also reduce your risk of future legal liability.

Organize and Review Franchise System Documents

As part of the due diligence process, potential buyers — and their attorneys and financial consultants — will evaluate all documents related to your company.

Incomplete or disorganized documentation will discourage the most qualified buyers, or result in low-ball offers to purchase.

Your franchise and business law attorney can provide a list of documents for you to assemble and create a comprehensive due diligence packet. Your attorney can also review your documentation and help clean up any potential problems or missing items.

Ensuring that your documentation is complete and legally sound will help pave the way for a smooth sale of your franchise company.

Compile Financial Data for Your Franchise System

Income statements and balance sheets are crucial documents every potential buyer will want to closely examine. But you should also be prepared to provide detailed data regarding your company’s financial history and ongoing operations.

Buyers will require data on franchise sales, gross margins, net profits, geographic sales trends, assets/liabilities, AP/AR, etc. Complete financial data helps demonstrate the earning potential of your franchise company.

If you don’t have the framework in place to gather the necessary financial data, your business attorney, CPA and tax professional can assist you in determining what is needed. To help expedite the process of selling your franchise, consider having your CPA formally review or certify your financial data and provide a statement for your due diligence package.

If you are a franchisor considering a possible company sale, an experienced franchise attorney is a powerful ally in preparing for the complex due diligence process. The experienced, professional attorneys at Franchise & Business Law Group can provide expert representation throughout the sales preparation and contract phases.

To learn more about selling a franchise system, or for advice on other franchisor matters, contact our Salt Lake City, Utah, office today.