Selling a franchise network

PREPARATION FOR THE TRANSFER OF A FRANCHISE NETWORK

This preparation should include the following points :

• Accounting preparation of the company or companies that own the network
• Preparation of the communication to the members of the network
• Legal preparation of the franchise contracts, which must include the authorisation to transfer the network
• Preparation of the strategic plan for the next 2 to 3 years
• Optimisation and securing of real estate properties or relationships
• Financial appraisal of the network in order to determine the value of the network
• Financial diagnosis of the network in order to highlight the economic performance of the network
• Drafting of a very complete presentation file (possibly translated into several languages) which will be given to potential buyers and/or investors.

Each of the above-mentioned points of preparation must be addressed in a rigorous manner.

Sloppy preparation, or worse, a lack of preparation, is often the cause of failure when it comes to selling a franchise network.

All too often, the presentation files that transcribe the main points of the preparation do not meet the expectations of buyers and investors. The result is a waste of time for everyone.

In particular, the questions of accounting preparation and network valuation are delicate. They often require accounting adjustments to identify, for example, the investments made in development in order to highlight the true profitability of the company or companies holding the network.

Similarly, the valuation approach will be quite different for a branch operator, who may highlight the ownership of business assets, which are all elements of asset valuation.

Similarly, the question of real estate ownership can have a strong impact on the value of the network, depending on whether or not it is controlled directly or indirectly by the company that carries the network.

The franchisor, on the other hand, is a creditor of obligations on the franchisees linked to its network under the terms of franchise agreements. The valuation approach will therefore be different in this case.

The value of the network will be based on the value of the brand, the know-how, the quality of the products or services marketed, but also on the quality of the franchise agreements: exclusivity, renewal conditions, financial conditions, quality control, transfer conditions, etc…

IDENTIFYING BUYERS/INVESTORS

This phase is as delicate as the preparation phase for several reasons:

• It is inconceivable for a franchisor or branch to communicate internally within its network about its transfer project.
• It is not conceivable for a franchisor or branch to communicate to competitors about its transfer project.
• It is inconceivable that the network’s customers would be informed of the transfer project.
• The financial stakes are such that few buyers are eligible to take over a network.

For all these reasons, Actoria Conseil has set up a specific process to identify buyers/investors of a high financial level while respecting a perfect confidentiality.

International operations are particularly favoured and Actoria Conseil’s international logistics enable it, for example, to close all communication on the project in one or several European countries.

For several years, Actoria Conseil has developed a strong expertise in the total or partial sale (opening of capital) of networks and can accompany you from A to Z on all the issues involved in the sale of a franchise network, whether it is located in one or several European countries.