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For many franchise owners, their business is more than a source of income. Years of hard work and sacrifice built it into their largest financial asset, one that often funds retirement or the next business venture. So, when the time comes to transition out of the enterprise, a critical question arises: whether a business can be sold independently or if it requires a professional broker to assist.
In the age of digital marketplaces, accessible online listing platforms, and direct networking via social channels, the concept of a For Sale By Owner (FSBO) business transaction can seem appealing. Furthermore, franchisees can certainly save on the commission fee, which might offset the extra time and effort required to make a deal.
In theory, that may all be true. In practice, however, selling a business is one of the most complex and exhausting endeavors someone will ever undertake. While a DIY approach might work for minor asset liquidations, a full-scale resale requires navigating a minefield of transactional challenges.
Here are some factors franchisees should keep in mind when considering whether to work with a franchise broker:
Brokers, especially ones with relevant industry experience, have a network of motivated, qualified buyers seeking similar business opportunities. When buyers are competing to make an offer, sellers are bound to get more from the sale, both in price and in favorable terms. Often, the higher price offsets the broker’s commission.
When working with a broker, time isn’t wasted on tire-kickers or buyers who can’t pull together financing for the deal. A broker ensures interactions only with serious buyers who have the financial means to make an offer.
Sellers know what it takes to keep their business running profitably. The process of selling a business requires dozens of additional hours per week to screen buyers, conduct long and repetitive discovery meetings, and respond to inquiries and requests for documentation. Because maintaining confidentiality is essential, much of the work will need to be handled outside of normal office operations. It can be exhausting, and some sellers simply give up on the process.
Even buyers who are a good fit and serious about making an offer can drag out the process for months. The process of discovery, franchisor vetting, and negotiations may take up to six months to receive an offer to evaluate. Part of the broker's job is to ensure consistent communication and to handle routine requests for information. If a buyer cannot keep the process moving, a broker can move on to other buyers who are prepared to make an offer.
A business sale involves hundreds of details, each of which can affect the deal’s viability and the sale's profitability. This is probably the largest and most complex transaction of a business owner’s life. If they are doing it for the first time, it can be easy to overlook something important. A broker sells businesses every day and knows exactly what to look for. Their job is to keep their client away from costly pitfalls and unforced errors.
A broker can also take the emotion out of the sale and help both parties focus strictly on the numbers. It’s easy for a seller to take buyers' questions as challenges. Discussions can become emotional, even heated. Some buyers and sellers can dig in, determined to “win” the negotiation. An intermediary understands how to keep the conversation going and keep it centered on what matters. They help both parties see issues more clearly because they don’t have an emotional stake in the outcome.
A good broker will handle financial analysis and proper valuation, marketing to and screening buyers, evaluating offers, and negotiating terms. That allows business owners to stay focused on what matters most: running their company. Because brokers are only paid when the deal closes, their motives are aligned. The seller and broker both want to get the highest offer and close as cleanly and quickly as possible.
As well-intentioned as it might be, deciding to sell a business independently to avoid a brokerage fee often proves counterproductive. The value a specialized intermediary brings to the table extends far beyond simply matching a buyer with a seller. An experienced broker will make sure both parties walk away feeling like they got a good deal.
Hiring the right broker is an investment, not just another expense. An experienced broker can help sellers reach more qualified buyers, negotiate a stronger deal, and avoid costly mistakes along the way.
Jon Franz is the founder of Franchise Clearly, a leading franchise resale and business brokerage firm specializing in franchise and hospitality transactions.