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Home > Tools and Resources > Buying a Franchise > The Unspoken Selection Criteria For A Franchise System

The Unspoken Selection Criteria For A Franchise System
The not-so-often considered question: What can I count on when it's time to exit?

By Vasilis Georgiou CBI, M&AMI, CBB, MBA, CIRM | President, CrossRoads Business Brokers, Inc.
Contact Vasilis Georgiou CBI, M&AMI, CBB, MBA, CIRM | Visit Website | About The Author

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As in any other type of business ownership, you have to look at franchise ownership in its full cycle. At the end of the day, you are not only getting in it for the freedom and control you can gain, but also to build an asset that will continue appreciating with time. Of course, appreciation means nothing without the ability to monetize it in the open market.

The exercise of putting any business up for sale it's an emotionally draining exercise, often accompanied with lots of frustration. Buyers, serious or not, demand attention that will often take you away from your day to day activities and can be disruptive to the business. Of course, a qualified Business Broker can mitigate a lot of that. However, a Broker is only as good in producing results as the market dictates. That's where the Franchise System you are part of can make a big difference.

Not all Franchisors are created equal. The most important criteria to look for in a Franchisor when it comes to your exit strategy, after you determine that there is a good fit to begin with, has to do with the simple answers to the following questions: (a) What is the Franchisor System's track record for resales? (b) What is the typical Multiple of Discretionary Earnings or EBITDA for the business? (c) Does the Franchisor have the people and mechanisms in place to help the Franchisee effectively exit the system when he/she chooses to do so?

Good Franchisors understand that part of their value proposition is the creation of exit value. Good Franchisors need to demonstrate that they understand that a big part of creating value for the Franchisee is to enable them to monetize their asset after years of hard work, or even in cases of misfortune. If the Franchisor is a true partner, they need to develop effective mechanisms that facilitate the smooth transition of the local franchise to the new owner. Here are some characteristics to look for in a Franchisor when it comes to the exit event:

*Dedicated support staff who specialize in franchise resale events
*Relationships with legal professionals as well as Brokers
*Mechanism to broadcast and promote the re-sales within their internal and external networks
*An open, cooperative attitude towards making the sale possible in a seamless way
*Low resale transfer fees
*A good track record of successful resales

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About The Author

Mr. Georgiou is currently the President of CrossRoads Business Brokers, Inc. & www.TheFranchiseCrossRoads.com, and has been involved in a great number of business transactions over the last 10 years. He is also a national Franchise Consultant with FranChoice advising hundreds of franchise Candidates in their search for a franchise. Since 2008, he has been a successful multi-unit owner/operator of a Home Care Franchise in California. Previously, Mr. Georgiou was a former Senior Manager with KPMG Consulting (BearingPoint) where he advised and assisted various Mid-Market companies with operations, strategy, and systems.

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