Business Broker Fees: What a Broker Costs a Franchise Owner

Business Broker Fees: What a Broker Costs a Franchise Owner

Business broker fees are not one number, and for a franchise owner the fee on a brokerage agreement is not the whole cost of selling. The published ranges describe a flat fee on the smallest sales and a percentage of the price that steps down as the price rises. They come from sources about business sales in general, not franchise resales, and your own quote will depend on your deal. This article gives the ranges published in two broker-written articles on BizBuySell, what moves a fee, how fees are structured, how we price our own work, how we differ from other brokers, and what to ask before you sign.

How much does a business broker charge?

There is no single rate. One published pattern is a flat fee on small sales, a commission of roughly 10 to 15 percent on mid-size sales, and a rate that steps down on larger ones.

Two guest articles by working brokers in BizBuySell's Learning Center describe it this way. Below $100,000, a flat fee is common, and one gives the example of a $10,000 or $15,000 commission on a business valued at $95,000. Between $100,000 and $1 million, the same article calls ten to fifteen percent the most common commission range. Above $1 million, fees often step down on a sliding scale called the Double Lehman: around 10 percent of the first million, then 8 percent of the second, and so on to a 2 percent floor. Both articles say fees are negotiable, and one says the commission depends on the state, the price and the size of the business.

These are brokers' own descriptions of business sales in general, not franchise resales. Rates on a franchise resale vary from one broker to the next, so ask each one for theirs in writing.

What moves a business broker's fee on a franchise sale?

Deal size sets the baseline. Within it, four things move the fee:

• Complexity. A franchise with clean financials and a simple ownership structure takes less work to market and close than one with messy books or several entities.
• Marketing and buyer screening. Reaching qualified buyers, protecting confidentiality and filtering out poor fits is ongoing work, and it is priced in.
• What is bundled. Some engagements include a valuation or an offering memorandum. Others treat it as a separate line.
• Region. What is standard in one market is not automatically standard in another.

Because each of these varies, be wary of any article, this one included, that gives a single percentage for every deal size and every industry.

Do I pay a broker upfront, or only when the franchise sells?

Both patterns exist, so ask which one a broker uses. Some firms are paid only if the business sells. Others charge an upfront or retainer fee as well as a fee at closing.

Neither suits every seller. A fee paid only at closing lowers what you pay at the start, and it is worth asking how much marketing and screening happens before a qualified buyer appears. An upfront fee spreads the cost differently, and it is worth asking what it covers.

Our own engagement is an onboarding fee plus a success fee at close, so most of our pay arrives when yours does. The amounts depend on your deal, and we go through them with you before you sign anything. For owners who would rather sell on their own with our guidance, our Sell-A-Franchise Toolkit page shows its flat one-time fee.

What is a broker's fee paying for?

It pays for a set of work, and knowing the list helps you judge a quote. For a franchise sale it covers:

• Marketing to buyers. Reaching qualified buyers while keeping the sale confidential until you decide what to share.
• Screening buyers. Qualifying inquiries, due diligence and getting a serious buyer to a real offer.
• Negotiating offers. From the first offer through final terms.
• Franchisor approval. The buyer must clear your franchisor in every sale, and the broker helps with the paperwork and closing steps that go with it. Our article on what franchisor approval involves covers what the franchisor reviews.

None of this tells you what a fee should be for your deal. It tells you what you are paying for when a number is quoted.

How is Franchise Sellers different from other business brokers?

We work only with franchises, and we have done so since 1997. We have worked with 50+ franchise brands, so the steps are familiar: what a franchisor will ask for, what approval paperwork involves, and what a buyer needs to see before making an offer.

That experience is why we run an efficient process. Knowing what comes next saves a seller time and keeps a sale moving, and it is the part of a broker's work that a fee percentage does not show.

You do not need to choose us to use anything above. Compare us the way you would compare any broker: the same questions, the same written answers. We are confident in our service and in what we charge, and we would rather you check both against other quotes line by line.

What does a franchise sale cost that is not the broker's fee?

A franchisor may charge its own fee on a transfer, and your franchise agreement is where to look. The federal rule for Item 6 of the Franchise Disclosure Document, titled "Other Fees," lists "transfers, and renewals" among its examples of fee types to disclose (16 CFR 436.5(f), via Cornell Law School's Legal Information Institute). Items 17(k), (l) and (m) cover what counts as a transfer, the franchisor's approval and its conditions (16 CFR 436.5(q)).

Transfer fees differ from brand to brand, so plan around what your own agreement says and not around a figure from an article. In a sale we handle, the franchisor confirms its fee and requirements as part of the approval steps.

What if I am selling more than one unit?

Ask whether a broker works out the fee on each unit's sale or on the total, and whether selling the whole portfolio is priced differently from selling one location. Brokers handle this differently, so get the answer in writing.

How do I get a real fee quote for my franchise?

Start with three things you control. Put the same questions to each broker you speak with: the rate or tiers, any upfront or retainer fee, what the fee includes, and who handles the franchisor approval paperwork. Get the answers in writing. Then have your franchise attorney read the agreement before you sign it, because the terms of a listing agreement are theirs to explain and we are not the right person to read yours.

A fee quoted as a percentage means more once you know what the franchise is worth. A free Opinion of Value gives you a value range for your franchise, based on our experience with franchise sales, on a personal valuation page with a video walkthrough prepared by Eric and our team. It is free, with no card on file, and getting one does not commit you to selling. Request your free Opinion of Value to put a value beside the percentages. If a buyer's value may differ from yours, why a franchise valuation feels off explains why.

This is general information, not legal, tax or financial advice. Talk to your own attorney, CPA or lender about your situation.

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