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Can an Employee Buy Your Franchise?

When we get ready to help an owner sell their franchise, an important part of our job is to find qualified buyers. That includes a category of buyer some owners might overlook: their own employees.

Most owners have at least one trusted employee who already knows the business, perhaps even runs one of the units. They’re a valued asset, but often overlooked as a potential buyer because the owner knows what they make – how could they afford to buy a million-dollar franchise on their salary?

That’s where an experienced broker can help. We can serve as an objective third party to get the franchise ready to sell and gauge the interest and qualifications of both internal and external buyers. There are some pitfalls in selling your franchise to an employee; we can help you avoid them. Here’s how the process works.

The first step in getting ready to sell is an evaluation of your business and the setting of the sale price. Having a professional broker complete this process takes the emotional component out of pricing the business. Both parties can see the factors that go into valuation and observe that the process was fair and objective.

We’ll connect the employee with experienced lenders who understand the industry and what it takes to finance a purchase like this. We’ll help you and your employee determine whether they can actually qualify for a loan. In most cases, a buyer will have to come up with 10 to 20 percent of the asking price, which is much more achievable than having to come up with the full sale value. Our relationships with lenders and the franchisors will allow us to help both parties understand the purchasing process and franchising fees that will be required.

Next, we package the business and put it on the open market. Even if you strongly favor selling your business to your employee, the market will give us information that will be useful. Other buyers may see issues and ask questions that the owner and employee might not, since they’re too close to the day-to-day operations. If we receive other offers for the franchise, we’ll have a clearer picture of how competitive the employee’s offer is. We’ll also have a Plan B if the owner / employee deal falls through.

Selling a business is a complex process with lots of moving parts. It’s challenging for an employee to manage everything involved in purchasing the business while working full time in the business. We can help keep the process moving during what could be months of negotiation and due diligence.

Selling a business can also be an emotional process, and negotiations can become tense. Having your broker there as an objective intermediary can help lessen tension and maintain the relationship. We also have the advantage of knowing what other buyers would ask and expect, which makes the process of asking tough questions or relaying unfavorable information less personal. If the deal doesn’t work out, you hope to go back to your previous trusting employer/employee relationship; having a broker as a go-between is your best hope of that.

There are plenty of reasons a senior employee is a great potential buyer for your franchise. They know the business and the franchise’s branding and operational priorities. They have relationships with customers and can offer continuity and great customer service after the sale. They present less risk for lenders and are much less likely to fail than a buyer who’s never been in the business.

The downside is that you’re like family and doing business with family can be much more complicated than doing business with a stranger. Expectations and emotions can run high on both sides. Even if you think you have found the perfect buyer, bringing in a broker can make the process easier and more efficient for both of you.


About Franchise Clearly®
Franchise Clearly® specializes in reselling franchise businesses. Working with owners, they work through a defined proprietary process that finds highly qualified buyers and guides them quickly to the closing table. Their innovative team approach makes for a seamless process that nets the highest offer and the best terms possible for the seller.

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