Reader’s Question: How Did You Go About Selling Your Franchise?

(Ambrosio’s note:  This an excerpt from a recent email I received from a loyal reader and supporter of the blog.  The reader’s question consists of 2 parts.  I will devote a separate blog post to answering the second part of the question tomorrow.)

R.C.:  I know you owned a UPS store, how did you go about selling it?

Ambrosio:  I sold my store to a family that was in the process of selling their own UPS Store somewhere in the Bay Area, and they were looking to re-invest the proceeds in a bigger store in San Francisco.  They belong to an entire clan of experienced UPS store owner-operators, with dozens of stores in California, so they have a lot of experience in purchasing and running this type of business.

I knew the family was interested in acquiring more locations in San Francisco, so when the right time came for me to sell, I made a few phone calls to my fellow franchisees.  Word got around and within days, I received and accepted a formal offer.

There was very little negotiation.  They basically stated what they were willing to pay, and since the multiple they used to value my store was within the ballpark of what previous sellers had received, I accepted.

The easiest way to sell a franchise business is to find current franchisees who are looking to expand.  With mature franchises like The UPS Store (formerly Mailboxes, Etc), chances are most prime territories are already spoken for.  So if a current franchisee wishes to add more stores to the portfolio, the smartest way to go is to purchase an existing store in a lucrative territory.

There are lots of advantage to selling to current franchisees. They know exactly how much a store is worth, and you don’t have to worry about training them to run the business.  And by selling to a current franchisee, you won’t have to pay a business broker or your franchisor up to 10% of the selling price to put a deal together.  This is potentially a lot of money that you deserve to put in your own pockets.

That’s why I think it’s vital to have a good working relationship with other owners in your city, because they will likely be your primary buyers. Out of the 4 other San Francisco stores that changed hands during my 3 years in the system, 3 were sold to current franchisees and 1 was sold to a UPS driver and her family.