Selling an Absentee-Run Franchise: When a Manager Runs It Day to Day
A manager runs your franchise day to day, and you are thinking about selling. Selling an absentee-run franchise comes down to one question every buyer asks: does this business run without you? You answer it with proof, not with a claim, and three things carry the proof: how the location is actually run, what your manager would say to a buyer, and what your franchise agreement says about who operates the business. This article covers each of the three.
How do I show a buyer the business runs without me?
Show it on paper. A buyer will not take your word that the location runs itself, so give them records that say so.
- What only you do. Write down every task that still reaches you in an ordinary week, and be honest about the hours. A short, accurate list is more believable than "I'm hardly ever there."
- Who decides what. Name the decisions your manager makes alone, such as scheduling, ordering and handling a complaint, and the ones that still come to you.
- Earnings that show the manager's pay. Keep the location's earnings as they are in the books, with your manager's pay in them. How those earnings are adjusted for a sale is work for the people who value franchises every day, so bring the records, not your own recast.
- Relationships held by the business. Customers, suppliers and the landlord should deal with the location, not only with you.
This is what a buyer has to see before believing the answer.
What will a buyer ask about my manager?
A buyer may ask whether the manager stays, what they are bound to, and what the business loses if they go. Expect these questions and have an answer ready for each.
- How long have they been in the role, and what did they do before?
- Are they trained? Item 15 of the Franchise Disclosure Document, the item on who operates the business, asks the franchisor to disclose whether an on-premises supervisor must complete the franchisor's training program (16 CFR 436.5(o)). Know whether your manager has done it.
- What are they bound by? The same rule asks for any restrictions the franchisee must place on its manager, and gives trade secrets and covenants not to compete as examples. Know what your manager has signed.
- Do they plan to stay? A buyer may want to speak to them. Whether to offer a retention arrangement, and in what form, is a decision for you and your advisers.
- How is the manager paid, and is any of it tied to you personally?
The manager is a person whose answer a buyer may weigh heavily, so decide when to tell them before a buyer asks to meet them. Confidentiality is available throughout, and you choose how much of the business a listing shows.
Does my franchise agreement let a buyer stay out of the day-to-day too?
Maybe, and only your agreement can say. The buyer's own role is a separate question from yours, and the franchisor's approval is part of every sale.
Item 15 is where the franchisor states whether the franchisee must participate personally in the direct operation of the business, and whether the franchisor recommends it. Where on-premises supervision is not required, the rule asks the franchisor to disclose limits on whom the franchisee can hire as supervisor, whether that supervisor must finish the franchisor's training, and, for a business entity, any equity interest the supervisor must hold (16 CFR 436.5(o)). That tells you what the franchisor must disclose. It does not tell you what your agreement requires of you or of a buyer.
How franchisors treat a buyer who plans to hire a manager and stay out of the operation varies, so ask your franchisor in writing what it requires of the person who operates the location, and have a franchise attorney read the answer against your agreement. That is the one step here to hand to a professional.
Two other documents can change the picture. If the term is close to ending, our article on franchise agreement renewal covers the decision. If a manager runs more than one of your locations, read selling a multi-unit franchise as well.
What should I do first?
Four steps, all within your control:
- Write down what you do in a normal week, task by task, with the hours.
- Put your manager's role, pay and any signed restrictions in one place.
- Ask your franchisor in writing what it requires of the person who operates the location.
- Get a current number before you speak to a buyer.
A free Opinion of Value is that number, and it commits you to nothing. It is a personal valuation page with a custom video walkthrough recorded by a senior advisor, free and with no card on file. Request your free Opinion of Value and say that a manager runs the location.
If you decide to sell, we help with buyer screening, due diligence and offer negotiation, franchisor approval, paperwork and closing steps, and confidentiality is available throughout. Our sell a franchise page shows how we work with owners.
Frequently asked questions
Neither term has one fixed meaning, so they mean what the person using them means. In this article, absentee-run means a manager runs the location day to day and you step in rarely. A buyer may use semi-absentee for their own plans, so say how many hours you spend and let the buyer judge.
There is no general answer, so decide before a buyer asks to meet them. Confidentiality is available throughout, and you choose how much of the business a listing shows. The manager is a person whose answer a buyer may weigh heavily, so plan that conversation first.
It depends on the numbers. What a manager's pay does to the earnings a buyer sees is a question for the people who value franchises every day, which is what the Opinion of Value is for.