Franchise agreements allow you to operate a local branch of a company by purchasing a franchise store, restaurant or service. But happens when you want out? Franchise contract agreements vary by corporation, but some franchisors will buy back the franchise directly. Other franchisors may help locate a new buyer qualified to purchase your franchise operation. The parent company has an incentive to supervise the process since the inability to sell a franchise gives the public a negative perception of the worth of the franchise. Corporate supervision also ensures the new owner understands the legal contract requirements and practical details of running a franchise.
Read the franchise agreement to determine if the parent company has the option or right to buy back your franchise. Some agreements require you to offer first rights to your franchise to the franchisor. Other agreements require you to contact the parent company and work through the corporate office in transferring the business to the new owner following the terms specified in your franchise agreement.
Hire an attorney to review the franchising agreement to review any clauses requiring you to hold the franchise for a fixed term before selling. Some contracts also specify a fixed price for any buyback.
Remove any personal goods and items not part of the original franchise package, and remove any added equipment or supplies you don't wish to sell with the franchise.
Conduct an inventory of the equipment at your franchise noting specific details for all items. Include the condition and the serial numbers of the items owned by the franchise.
Estimate the value of the equipment and any franchise vehicles by contacting used equipment and vehicle brokers for written estimates of the value.
Take photographs of the items listed on your equipment inventory to document the condition.
Estimate the value of the unsold goods and products at your franchise using your inventory list and sales receipts for the purchases.
Conduct a survey of your franchise to identify damage and note the repairs necessary to improve the value of the structure, equipment, vehicles, signs and parking lot, if owned as part of your franchise.
Hire a local realtor or broker with commercial franchise experience or a commercial franchise appraiser to evaluate the worth of your franchise operation. This appraisal helps you evaluate the market value of your franchise. It also provides a sales amount to compare with the offer from the franchisor for your business — when your franchise contract allows negotiation of the final sales amount.
Notify the corporate office of your intent to have the franchisor repurchase or provide representation for the sale of your franchise after consulting your franchise operation manual and franchise agreement.
Sign the formal resale agreement provided by the corporate office, after your accountant and attorney examine the document.
- Franchise Magazine: Selling a Franchised Business -- Points for Consideration
- Entrepreneur: Franchising -- Aspiring Franchisees Need an Exit Strategy
- Businessweek: McDonald's Hamburger Hell
- AboutMcDonalds.com: Acquiring a Franchise
- Federal Trade Commission: Information Staff Advisory Opinion 98-8
- New York Life: Is Franchising the Way to Go?
- USA Today: Krispy Kreme Franchise Buybacks Are Questioned
Lee Grayson has worked as a freelance writer since 2000. Her articles have appeared in publications for Oxford and Harvard University presses and research publishers, including Facts On File and ABC-CLIO. Grayson holds certificates from the University of California campuses at Irvine and San Diego.