Have you ever wondered how many franchise businesses there are? Are they limited to just restaurants and real estate companies? There are currently over 700,000 franchises in the United States, and of those, 10%, or 70,000, sell annually.
Who handles those franchise re-sales? Currently a hodgepodge of everyone from home brokers to unlicensed individuals handles franchise re-sales. You might be wondering why the franchisors don’t handle the re-sales? That’s because there is no money in the transfer of the franchise; they just continue to get the royalty stream. Therefore, franchisors are not interested in assisting the franchisee’s selling of their business. Every franchisor in their uniform offering agreement, or UFOC, has the first right of refusal to buy the franchise back or the right to approve the prospective new franchisee.
Franchising has been around for approximately 50 years. Many franchises are now mature and some of the franchisees who got in early are now in their sixties and seventies and want to divest themselves of the franchises. Additionally, 35% of all franchisees own their own real estate and the other 65% receive zero help from franchisors when it comes to lease renegotiation. There in lies the opportunity for commercial real estate professionals, such as CCIMs, who are skilled in finance and lease analysis to attack this problem. CCIM partners can assist a franchisee in:
1. The sale of their franchise businesses 2. The sale of the real estate if the franchisee wants to sell his real estate 3. Sale-lease back opportunities or lease vs. buy 4. Lease renegotiation
What is a franchise and what is franchisable? It’s not just McDonald’s, Burger King, and Churches Chicken. It is everything from man-in-a-truck to moving companies to home care companies to a company with a neat sounding name such as PopALock, a local locksmith. And all of these businesses and territories, once the business is built up, are re-salable. The days of the mom-and-pop franchisees are leaving. Investment banks from New York and aggregation from professionals who are leaving the corporate world are realizing that it’s better to own 5 Subways than one.
There, again, is the need for a professional such as a CCIM. What sets Franchise Resales apart is that this firm approaches the franchisor first. They obtain from the franchisor the minimum requirements to own a franchise and pre-screen all potential buyers before the buyer even writes an offer. Then, once the buyer and seller reach a reasonable price it’s relatively certain that the transaction will close escrow because it is already known that the franchisor will approve the buyer. Then we look at the real estate. Is there a lease to renegotiate to provide the buyer of the business security? Are they buying the real estate from the franchisee or is the franchisee doing a sale-lease back? All of these transactions benefit from CCIM professional expertise.
Currently, Franchise Resales has under exclusive contract Churches Chicken, Navis, Sears, Right at Home and many other franchisors. The business was launched in Febuarary 2006 at the IFA convention and looks forward to greater growth. If you have a franchise you want to divest, please consult with a CCIM to assist you in that effort.
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