Growing a Franchise
For owners who rely on managers to run their franchises, preparing to sell means making sure the business can survive a leadership change and withstand a buyer's scrutiny.
In a semi-absentee franchise, the owner isn't usually the person running the business every day. A manager handles much of that work, which can be a selling point. But buyers will want to know what happens if that manager decides to leave.
Preparing to sell requires careful planning, especially when the business relies on a general manager or other key employees to handle daily operations. That arrangement can appeal to investors who don't want to work in the business full time, but they'll also want to know whether those employees will stay after the sale.
"Owning a semi-absentee business is attractive to most buyers — they are looking for income-generating investments that don't require much of their time," said David Busker, founder and principal of Franchise Vision. “So that makes it easier to market versus an owner-operator business. However, an owner must really know their business KPIs and be able to speak deeply about their business and numbers or they won't hold credibility with buyers.”
Prospective buyers will want to understand the business's financial performance, staffing structure and ability to operate without the current owner.
One of their biggest concerns, Busker said, is whether key employees will remain after the sale.
Owners considering an exit should examine how their businesses operate and identify areas where too much responsibility rests with one employee.
"Take a critical look at your processes, roles and responsibilities of your team," Busker said. “Create backups for each critical role so if any given team member leaves, your business can smoothly operate while addressing the gap. Being able to demonstrate a well-oiled operation to a prospective buyer will increase confidence and value in your franchise.”
Owners should also take a close look at their financial records before putting the business up for sale. Busker recommends separating personal expenses from business expenses and making sure profit-and-loss statements are accurate so buyers can get a clear picture of the business's earnings.
Buyers need reliable numbers to evaluate an acquisition, and disorganized records can raise questions during due diligence.
Busker identifies management continuity as one of the most important considerations when selling a semi-absentee franchise. Owners may hesitate to tell employees they're selling because they're concerned about creating uncertainty. While confidentiality may be appropriate for most staff, Busker recommends a different approach with the general manager.
"There is an understandable concern for a seller to avoid any communication on the sale," Busker said. “This is appropriate for your rank-and-file employees, allowing for a quick and seamless ownership transition. However, the key employee is typically the GM or operations leader, and as you prepare for sale, either get them on board or make a transition plan ahead of time to avoid a failed closing on the sale.”
A buyer purchasing a semi-absentee franchise is often relying on that manager to maintain operations. Losing that person during the transition could jeopardize the transaction.
Franchise owners cannot assume they can transfer ownership without franchisor involvement. Their franchise agreements may include transfer fees, buyer qualifications and approval requirements.
Busker recommends reviewing those provisions before marketing the business and checking whether prospective buyers meet the franchisor's financial and ownership criteria.
"Then as soon as the letter of intent is signed, notify the franchisor of the potential transaction as you work to get a signed purchase agreement," Busker said. "Have the buyer go into the franchisor's approval process upfront, which will allow them to work out any issues well in advance of your closing timeline. Waiting too late can kill the deal at the closing table."
Semi-absentee franchise owners hoping to leave on their own terms should begin preparing well before they're ready to sell. These three practical steps can help:
Busker's advice is to begin with the end in mind, consider alternative exit scenarios and build relationships with experienced consultants and brokers who can help owners evaluate their options.
For more on exiting a franchise, check out these articles on 1851 Franchise:
Sign up for the 1851 Franchise newsletter to get our biggest stories before everyone else
By signing up, you agree to our user agreement (including class action waiver and arbitration provisions), and acknowledge our privacy policy.
