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Selling a Successful Franchise for a Strong Market Value

Selling a Successful Franchise for a Strong Market Value

In early October, Bill Southwell, one of the senior business brokers representing established franchises for sale on IBA’s Franchise Resale Transaction Team, successfully completed the sale of one of the premier Molly Maids franchise territories (https://franchise.mollymaid.com/) in the United States for a client.  Mr. Southwell accurately valued the company, selling it within 15% of the asking price in a COVID-19 world based on pre 2020 financial performance despite a pause in the business model during the period this spring when people were afraid to have outsiders inside their homes; created a competitive marketplace where multiple buyers pursued the business opportunity; and successfully negotiated and closed the deal less than 150 days from when the business first entered the market.

The experience described is a common one for IBA’s clients wishing to sell their operating franchises in the Pacific Northwest and the members of our Franchise Resale Transaction team.  IBA’s successful sale of franchises for entrepreneurs wishing to retire or move on to another chapter of their entrepreneurial life is entering its 5th decade.  Sold franchises by IBA have included single locations and multiple unit chains serving numerous counties.  Industries represented have included food service business models like Arby’s, Dairy Queen, and Tony Roma’s; children focused educational platforms ranging from The Goddard School to The Little Gym; and a spectrum of industrial service providers from Pirtek to Royal Restrooms.

The resale of a franchise is a sophisticated process requiring a senior level of knowledge, experience, and a high professional skill set.  The first step in selling a franchise is to establish its anticipated market value.  IBA offers this service on a complimentary basis for potential clients interested in employing our “100% paid on performance” business model to sell their business. This free service is valued by the list of franchisors who often recommend their clients use IBA to sell their businesses in Washington, Oregon, & Alaska because it allows them to put their clients in the hands of collaborative professionals who can incorporate market dynamics and demand into the valuation that they lack.  A simple example is the impact of local taxation, rent, and labor rates on business value.  The same franchise doing the same gross revenues will sell at different values in Washington, Oregon, and California.  Only a party actively engaged with the marketplace doing a high volume of deals possesses the knowledge to incorporate factors of this nature into pricing.  If franchisors with 1000’s of domestic and foreign locations trust IBA in the Pacific Northwest to insure a smooth transfer of ownership, it is common sense that individual entrepreneurs frequently reach the same conclusion.

The second step in selling a franchise involves professionally marketing and creating buyer demand for the opportunity.  IBA’s sale process starts with the participants in our proprietary buyer database program. These individuals come to IBA looking to acquire companies with specific business models and geographic locations and participate in the program to get the first look a new businesses represented by IBA for sale.  A percentage of these parties come to us because they are enamored with a specific franchise and are considering buying and starting a new franchise from our Certified Franchise Broker, Curt Maier.  Situations, where an established, profitable franchise can be purchased instead of a new start-up, can result in a change in the entrepreneurial path when a time & place opportunity is presented with the same business model as an unanticipated alternative.  Conversely, it is not uncommon for a buyer to “fall in love” with a franchised concept in a resale opportunity, but not like the location and move forward with a franchise purchase with Mr. Maier that allows them to place the franchise in the community of their selection.

Simultaneously with working with buyers in our database program, IBA will, while protecting the confidential nature of the sale, aggressively advertise the business for sale at our own cost to create a competitive market of potential buyers.  It is rare when a buyer in the marketplace is not in our database or touched by our marketing programs based on our strong market presence, reputation for superior customer service, and the significant percentage of transactions we complete in the region.

A buyer identified, IBA will facilitate negotiations and information disclosure so the buyer buys the business with “open eyes” utilizing “best practices”.  This attention to detail is greatly appreciated by franchisors as it allows them to delegate issues ranging from due diligence to legal documentation execution to facility lease assignment or negotiation to professionals with relevant knowledge and licensing for the location of the business.  For example, the assignment of a lease from one tenant to another requires a real estate license in the state where the franchise is located.  All members of IBA’s Franchise Resale Transaction team hold one or more real estate licenses in the Pacific Northwest region.

Franchises offer some of the most recognized brands in the world.  Buyer demand for successful franchises has remained high throughout this century.  IBA welcomes the opportunity to facilitate equity liquidating events for business owners wishing to convert their hard work and entrepreneurial success into cash at strong market values.  Franchise closures require disclosure and can damage brands.   It is always in the best interest of a franchisor for a franchisee to sell their franchise versus shut their doors, even if the business is struggling.  Restart opportunities for quality franchises periodically offer value propositions with significant upside potential to buyers willing to roll up their sleeves and address weaknesses in management and/or business operations. Business Buyers consistently covet franchises because they offer time tested business models supported by corporate infrastructure.

If you are interested in selling your franchised business or buying a new franchise in 2021, our Franchise Sale and Resell teams would welcome the opportunity to provide an overview of our client services.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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