Should I Use a Business Broker to Sell My Franchise? What to Consider

Selling a franchise takes more than finding someone willing to buy it. Owners need to settle on an asking price, evaluate potential buyers and get the franchisor's approval before completing the sale. Some choose to handle these responsibilities themselves, while others work with a business broker. Hiring a broker can make the process easier, but it also means paying a commission that cuts into the proceeds from the sale.

What Does a Business Broker Do?

A business broker helps owners establish an asking price, market their business, identify qualified buyers and negotiate a sale. For franchisees, brokers may also coordinate with the franchisor to ensure prospective buyers meet the brand's financial and operational requirements.

Selling a franchise also comes with requirements that independent business owners generally don’t face. The franchisor may charge a transfer fee, require the new owner to complete training and review the buyer's qualifications before approving the sale. A broker familiar with franchise resales can help owners prepare for these steps and address potential problems before they hold up the transaction.

When Does Hiring a Business Broker Make Sense?

One of the biggest advantages of hiring a broker is access to prospective buyers. Owners who advertise independently may struggle to reach qualified candidates, particularly those unfamiliar with the franchise brand.

Buyers interested in established franchises often have different priorities than people considering new franchise opportunities.

“We don't do anything with new franchise development, and we feel like it's absolutely a different customer, that customer who wants a resale,” said Robin Gagnon, co-founder and CEO of We Sell Restaurants, a business brokerage franchise specializing in restaurant sales, on an episode of the “Multiply Your Success” podcast.

Existing franchises can appeal to buyers seeking an operating business with employees, customers and a financial history. Brokers specializing in resales may have relationships with individuals actively pursuing these opportunities.

Brokers can also help owners evaluate offers, maintain confidentiality and manage negotiations. This can be especially useful for franchisees who have never sold a business or lack the time to communicate with prospective buyers while running their locations.

Brokers can also help owners prepare their businesses for sale. Gagnon said her company provides franchise systems with educational resources to help owners plan for an eventual exit.

“We have built so many materials: e-books, a checklist of the steps involved in selling to understand when and whether you're ready to sell, succession planning guides and all kinds of materials,” she said.

When Might You Be Better Off Selling Without a Broker?

You don't need a broker for every transaction. Owners who already have an interested, financially qualified buyer may be able to complete the sale without paying a brokerage commission. An existing franchisee might want to purchase another location, or a family member, employee or business associate may be interested in taking over the operation.

Gagnon also warned sellers not to focus exclusively on existing franchisees as potential buyers. Someone already operating within the system may be familiar with a location's struggles and use that history to justify a lower offer. Buyers from outside the brand may be more interested in the business's potential and willing to pay more.

“They're coming in from an external group. They're going to pay the most,” Gagnon said. “They're excited. They want to come into the brand.”

Owners should also consider their experience handling business transactions. Franchisees who understand the sales process, have a qualified buyer and feel comfortable negotiating may prefer to sell independently. Even without a broker, sellers should consult an attorney experienced in franchise transfers and an accountant familiar with business sales.

How Much Does a Business Broker Cost?

Most business brokers are paid when the sale closes, receiving a percentage of the final purchase price. For smaller businesses, that commission typically falls between 8% and 12%, depending on the broker and the terms of the agreement.

A 10% commission on a $500,000 sale would cost the seller $50,000. Franchisees should weigh that expense against the potential benefits of reaching additional buyers, obtaining negotiation assistance and saving time.

Before signing an agreement, owners should understand the commission structure, contract length and whether a fee applies if they find the buyer themselves.

How Should Franchisees Choose a Broker?

Franchisees should look for brokers with experience selling businesses in their industry, preferably within franchise systems.

Ask prospective brokers how they determine a business's value, where they advertise listings and how they screen buyers. Owners should also request examples of comparable businesses the broker has successfully sold.

Before hiring anyone, franchisees should review their franchise agreement and discuss transfer requirements with their franchisor.

Key Takeaways: Should I Use a Business Broker to Sell My Franchise?

Consider a broker when you need help finding buyers. Experienced brokers may provide access to qualified candidates outside the existing franchise network.
Evaluate the commission against the benefits. Owners with a qualified buyer may not need full brokerage services.
Prepare before listing the business. Organized financial records and an understanding of franchise transfer requirements can help prevent delays.

Ultimately, hiring a business broker makes sense when the expertise, buyer network and assistance provided justify the expense. Franchisees who already have a qualified buyer may be better served by handling the sale themselves with appropriate legal and financial guidance.

For more information on franchise brokers and the sales process, check out these articles on 1851 Franchise:

Should I Use a Business Broker to Sell My Franchise?