Selling a Company Today Requires a Well-Defined Process

By Rick Ormsby
Managing Director
502-252-6422
[email protected]

In the not too distant past, selling a restaurant company was often accomplished by one franchisee sitting down with a neighboring one, coming to terms on a napkin and taking over in a few weeks. Over my 15 years of experience, I have seen the process of selling a business become progressively more difficult, complex and time-consuming as the size and sophistication of the franchise industry has changed so dramatically.

The average number of units per franchisee has grown substantially over the past 10 years as franchisees have grown through acquisition or new unit development. Professional money has also entered into this business in a big way.

This means there needs to be a well-defined process if and when you decide to sell your company. Process is more important than ever if a seller wants to achieve the best price and terms with the least deal risk.

Let me give you a few steps in the process:

  1. Performing a company-wide, store-by-store valuation. This can only be accurately accomplished once historical financials are analyzed, along with lease information, remodeling requirements, franchise agreements and other key information.
  2. Assembling a list of likely buyers. Increasingly, this list is national in nature and not brand specific. There are many thousands of franchise buyers across the country. As an example, it is equally likely that a buyer for a 15-unit franchise in Alabama would be a 100-unit franchisee of another brand in California as it is for a buyer to be of the same brand in the same geography.
  3. Confidentially marketing the business for sale. Buyers will need a marketing book or Confidential Information Memorandum (CIM) to evaluate what they could potentially buy. There needs to be clear definition on timing and criteria for submitting an offer for seller review and consideration.
  4. Developing a process and criteria for choosing the best buyer. Price isn’t everything. How about financial certainty? Likelihood of getting approved by the franchisor? Ability to operate the stores? Credit quality of the buyer? Lender standing behind them?
  5. Getting the deal closed. The process for closing on the sale of a franchise has become progressively complicated over the past decade. There are so many considerations – financing, appraisals, environmentals, inspections, due diligence, franchisor transfer approval…. these are just a few steps in a back-end process that can take up to 120-150 days and are full of frustrations and disorganization if not handled correctly.

At Unbridled Capital, we are experts in helping franchisees navigate the process of selling their companies. Please reach out to us anytime if you would like to talk confidentially about the process of selling a business successfully.

Rick Ormsby
Managing Director
502-252-6422
[email protected]