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  • Transactions Involving Franchised Business Opportunities

    Apr 28, 2015

    Transactions involving franchised business opportunities come in two forms. The first set of transactions involves the purchase of the rights to employ or develop a territory for a franchised business model in a specific geographic territory directly from the franchisor or in a transaction facilitated by a franchise broker. In this type of transaction, an individual is purchasing the rights to introduce a new business model to a geographic area. If the business model is sound and the entrepreneur purchasing the franchised business opportunity has strong business acumen and sufficient capital to support the business from start-up to maturity there is a strong probability that the business model and the entrepreneur will be successful. This is especially true for entrepreneurs that bring a new business concept to an area that is received enthusiastically by the public. In the Pacific Northwest in the last forty years, I have witnessed this occurring with as diverse business concepts as Supercuts, Travel Professionals International, Great Play, Krispy Kreme, and Fat Burger. IBA elected many years ago not to participate in this type of transaction given the knowledge that business models often struggle during their first three to five years of existence and frequently require the investment of significant time, energy, and resources by entrepreneurs to reach the velocity necessary to be profitable businesses that offer ownership an appropriate return on investment. If a party is interested in this type of business opportunity and contacts IBA, we will introduce them to one of the quality franchise opportunity brokers in our referral network or encourage them to reach out directly to the franchisors they find most attractive.

    The second set of transactions involving a franchise is for the sale of an established operating company employing a franchised business concept. IBA is regionally recognized as one of the premier business brokerage firms in the Pacific Northwest to represent entrepreneurs in the sale of their established, profitable franchises. It is our professional opinion that this set of businesses offer business buyers excellent opportunities to own & manage businesses, especially as first time entrepreneurs. The advantages of buying an established franchised business include a track record for revenue & profitability, a location & business model recognized in the community, an experienced staff of employees, and a franchisor that has a vested interest in the continued success of the business that provides knowledge, marketing, and researched suggestions for enhancement of the business. All of these factors contribute to creating an environment that has a probability of helping to facilitate future success for a business buyer post acquisition. It is our goal in every transaction we facilitate, to sell a business at a “fair” price and provide a buyer with an entrepreneurial opportunity that generates an appropriate return on investment for the industry and risk. In transactions involving franchises, IBA works collaboratively with the franchisor to facilitate an environment of full disclosure that is in the best interest of all parties involved in the transaction. IBA’s attention to detail, transaction facilitation expertise, and strong relationships with bankers interested in financing acquisitions often results in franchisors encouraging their franchisees to engage IBA for representation during the sale of their businesses in the Pacific Northwest. IBA’s representation projects in 2015 involving franchises have involved as diverse business models as Arby’s & Wing Zone and The Little Gym & Pirtek.

    A tangential set of transactions involving franchises facilitated by IBA relates to the sale of businesses employing business models that are attractive for franchising. IBA frequently sells businesses where a first generation owner has taken the business as far as their skill set, capital, and knowledge allows. A percentage of the buyers of these businesses are entrepreneurs looking for business models they can grow regionally or nationally, occasionally by creating a franchised business opportunity. It is exciting for both the seller & IBA to witness success stories where a business evolves from a single location business to a franchised business model with locations across a region or even the nation.

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community 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 in terms of successfully negotiating transactions that are “win-win” in an environment of full disclosure between the parties.

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