Things To Know When You Sell A Franchise
If you’re selling franchises of your company you’re considered a franchisor. This means you own a business and the products and trademarks of that business. By selling franchises, you agree to grant an individual the permission to operate an independent location of your business, using your business model. This person is known as a franchisee, and must comply with certain rules and regulations of your business throughout the term of the franchise.
Many business owners agree to selling franchises of their companies to allow their business to experience accelerated growth. A franchisor also collects a percentage of profits from each franchise and receives additional capital upfront by selling franchises. This can reduce the need for utilizing your personal resources, and allow you to expand even quicker.
Selling franchises may be the quickest way to obtain a higher financial return on your business, as a solo business owner cannot replicate himself and create rapid growth alone. Selling franchises also comes with fewer financial risks. The investments from franchisees are paid upfront, which requires less money for expenses to be provided by the franchisor.
However, other factors to consider when selling franchises in Alberta are:
Having less control over operations and management
Your business model remains the same, but how you manage a team or set sales goals may differ from that of your franchisee.
As the franchisor, you may come up with new protocols, go-to market strategies, improved products or have brilliant ideas to increase operations and profits. But before any implementation can occur, your franchisee must first agree with them. Not only does selling franchises require you to give up a portion of your control, but you must be willing to be flexible with negotiations and receptive to ideas from your franchisee.
Regardless of which province you live in, there are several laws involved with selling franchises. Before you are able to sell a franchise of your company, you’re required by law to provide essential information to your franchisee. A lawyer will be able to discuss with you in detail what is required from you by law and which documents must be in place to protect both parties from legal matters.
Selling franchises has its advantages and disadvantages
Lightening your load of responsibility by franchising your business to a franchisee allows for quicker growth while still making profits. You must also determine if it’s the right time for your business to experience growth, which depends on several factors. Speaking to a lawyer is the easiest way to avoid the confusion and mistakes that can occur when selling franchises, as well as determining your next steps.
Contact Kahane Law today for more information about selling franchises.