FORTUNE Small Business:

Tips for selling a franchise territory

An entrepreneur turns to Ask FSB for advice on selling an unused, undeveloped franchise territory.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

hotdog_mustard.03.jpg
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: I own two territories of a Coney Beach franchise near Brandon, Miss. I never developed them and now the franchisor and I have agreed I have one year to resell these territories. I don't know where to begin. Thoughts?

- Mary Sue Banks, San Diego, Calif.

Dear Mary Sue: Reselling an undeveloped franchise territory can be a tricky task.

Each franchise is going to have specific reselling rules so, like with most things, it pays to do your homework.

First, count yourself lucky you have the option to try to recoup your initial investment at all. Some franchisors will make it very difficult, if not impossible.

Next, take as much time as necessary to understand the parameters around the reselling agreement. Does Coney Beach - a restaurant with an upscale take on the '70s beach hot dog stand - have specific requirements about who you can sell it to? If so, it would be a waste of time to work out a deal with someone who has no chance of approval.

Next, find out what the business would sell for right now as a benchmark and begin putting together an attractive package of materials. The package will give a prospective buyer information about the franchise, including the franchise disclosure documents, and anything else that will give them a clear sense of the business and its potential.

"If I were investing a substantial amount of money, I'd want to know the details," says Grant Bullington, senior franchise development manager at 1-800-GOT-JUNK, a trash-removal franchisor.

This is especially key in your situation because Coney Beach is such a new franchise, with very few locations open to date. If that is making potential buyers balk, you'll want to include information about the franchisor's parent company, Beautiful Brands, founders of the popular Camille's Sidewalk Cafe.

Now it's time to get the word out. Try newspaper classifieds, (ask if they run any special franchise opportunity sections), Craigslist, and outreach to entrepreneurs in the area.

If that doesn't net you good prospects, consider a business broker. He or she will help you sell the territory for a commission.

Mario J. Altiery, president of the Upside Group, a Scottsdale-based franchise consulting firm, says it's important for your marketing plan to capitalize on whatever natural strengths your position may have. Exclusive territorial rights? Make sure your materials say that up front. National, respected franchisor? Also great to note. He also recommended finding out from the company, if you can, who owns the abutting territorial rights.

"They might have interest in adding those locations," he said.

Franchise expert Julie Bennett, author of The Franchise Times Guide to Selecting, Buying and Owning a Franchise, said she generally frowns on investing in territories - it's hard enough to develop one business, let alone a whole region's worth. However, the economy may be on your side.

"When there is a recession and people lose their jobs and go out with a severance package, that's good for franchises," she says - though cautioned that a recession centered on housing means less equity for people to tap.

The number of inquires into franchises is up a bit, as is attendance at franchise expos, Bennett says. She spoke from the International Franchise Association conference in Orlando.

"Most people here were pretty optimistic," she said.  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
50 years of the Ford Mustang Take a drive down memory lane with our favorite photos of the car through the years. More
Cool cars from the New York Auto Show These are some of the most interesting new models and concept vehicles from the Big Apple's car show. More
8 CEOs who took a pay cut in 2013 Median CEO pay inched up 9% in 2013 to $13.9 million. But not everyone got a bump last year. Here are eight CEOs who missed out. More

Sponsors

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.