Buying a Franchise
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Buyer Process
Forms & Applications
Case Studies
Current Listings
Brands & Concepts
Transactions Completed
Office Locations
NFS Staff
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Selling a Franchise
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Seller Process Case Studies Refranchising Transactions Completed Office Locations NFS Staff |
Screening and Securing Qualified Businesses
At National Franchise Sales, our experience in franchise acquisitions gives us the ability to facilitate all of the details involved in buying a franchised business. We are with you for every step of the process from initial contact to closing.
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Access to Nationwide Listings
Our team of agents are located throughout the US and provide listings of local, regional and national franchises
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Fast-track Access to Competitive, Long-term Financing
In most business sales when a seller asks for all cash on the sale of their business, the selling price is dramatically reduced. Until recently, financial institutions, especially banks, were frequently reluctant to finance franchise businesses due to a lack of familiarity with their nature.
Fortunately, in today?s market there are many lenders willing and able to loan money on franchised and small chain businesses. National Franchise Sales works with as many as 25 different lenders at any given time, with each lender having a "menu" of programs available within their institution. This menu, unlike a restaurant menu, is not posted or published for review by potential customers. For this reason the professionals at National Franchise Sales stay in touch with these financial institutions on a daily basis to ensure our buyers have the very best options available.
The lenders that National Franchise Sales works with can be put into 3 main categories including securitized, portfolio, and SBA (Small Business Administration). Some of their advantages and disadvantages are listed below.
- Interest rates are typically lower than other loan options
- May finance a larger portion of the project cost allowing for a lower down payment
- Potentially large prepayment penalties
- Typically not available for buyers with limited retail experience
- Less red tape in loan process
- Greater flexibility with refinancing allowing for future growth or divesting of specific franchise units
- Loan programs and availability of programs change regularly
- Less accessible to less experienced buyers
- No prepayment penalties
- Allows first time buyers an access to capital
- High loan origination fees
Rates typically higher than other options
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Financing
NFS identifies and sources competitive, long-term financing for buyers. The NFS knowledge of the lending markets allows buyers to obtain fast-track access to lenders familiar with the specific franchise brand.
We assist buyers by shopping for the best loan for the project, preparing loan applications, and seeing the process through to funding.
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Market-Based Valuation of the Business
Knowing the market value of the subject business is critical. NFS has been professionally valuing franchise assets since 1978. The professionals at NFS provide the most accurate and up-to-date valuation assessments available.
NFS accurately assesses the value of franchised operating assets by examining the following criteria to ensure a true market valuation:
- Adjusted cash flow of the business
- Unit sales trend
- Local trade area conditions
- Terms and conditions of the Lease
- Strength of the franchisor
Screening and Securing Qualified Buyers
Prospective buyers sign a Confidentiality Agreement prior to receiving any information.
Buyers then go through a qualification process whereby Financial Statements, Resumes, (professional experience), and credit history are reviewed.
Qualified buyers are then contacted and discreetly provided information.
- Condition of the facility
- Potential competitive intrusion
Recast Financial Summaries
There are a number of factors that affect the value of a Franchise. The primary factor is the income generated by the Franchise, also known as the "Principle of Production of Income."
The "Principle of Production of Income" asserts that the furniture, fixtures, equipment, and leasehold improvements are as valuable as the income that can be derived from them. Therefore we concern ourselves with an estimate of market value relative to the production of income as opposed to cost, book value, or replacement value. In this way, the Franchise is looked upon as a tool acquired with the intention of, and for the purpose of creating income.
When assessing the Production of Income of a Franchise for the purpose of determining market value, the income must be normalized to be viewed in the eyes of the buyer. This income production assessment is known as a "Recast Cash Flow." The Recast Cash Flow portrays a more realistic view of the future income potential of the business than typical measurements of EBITDA.
The Recast Cash Flow utilizes the historical sales and costs of the subject Franchise, combined with various adjustments to reflect the methods of operation of a new operator. Depreciation, amortization, and debt service are eliminated from the Recast Cash Flow.
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Debt Restructuring and Lease Negotiation
Through its vast experience with acquisition financing, NFS has developed a significant understanding of lenders? varying loan parameters. By utilizing this knowledge, combined with the pre-existing relationships with the community of lenders, NFS is able to assess and assist franchisees in arranging loan restructuring.
Similarly, the NFS knowledge of the landlords? perspective, allows NFS to effectively negotiate lease modifications and extensions.
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