Advice for Buying a Restaurant and Selling a Restaurant

Buying a Franchise Restaurant for Sale? Don’t Sabotage Your Approval with These Mistakes

Posted by Robin Gagnon on Apr 11, 2017 4:37:06 PM

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In the course of buying a franchise restaurant, there are a number of hurdles to overcome, not the least of which is the franchise approval.  For most brands, that includes a process for application, followed by a Discovery Day and culminating in an approval for the franchise restaurant buyer.  How does this go “off the rails” and result in a turndown?  Here are the surefire mistakes we’ve seen that destroy a relationship before it gets going.  The Restaurant Brokers can nearly guarantee a non-approval once you start down these paths to self-destruction or non-approval.   

Franchise approval starts and ends with the very thing each franchise restaurant for sale brand is actually selling to you.   They are selling access to their trademark, their trade secrets and a defined way of doing business.  For virtually every brand, the word “process” is critical so the first, most critical step is following their procedures in applying. 

Sabotaging Your Approval by Attempting to Leapfrog to Approval without a Contract 

Here’s one path to denial; changing up the application process.  For almost every franchise restaurant resale, the brand requires that first and foremost, you have an offer in place with the seller before you begin working on franchise approval.  The only exception to this is for a current franchisee of the brand.

Most franchise brands have a right of first refusal.  They want to hear from that franchisee – the one they are in an existing business relationship with, before they start talking to you as a potential buyer.  Therefore, until you and the seller have agreed on a price and come to initial terms, you should not circumvent the application process and go directly to the brand. The seller will either ask his restaurant broker to handle this or will take care of it himself.  In either case, the seller authorizes the first introduction.   

Certain buyers attempt to evade this requirement and go into the approval process as a “new buyer” and then tell the brand it’s for a resale.  This is a classic bait and switch.  Trust us when we tell you that the franchise development team working with you does not like this approach.  Their compensation for new sales is usually very different from resales and souring the relationship with the Area Developer or person who will be overseeing your success (and the transfer process) for the near and long term is not an advisable step and will quickly lead to a turn down.  If you are not trustworthy, why should an established brand bring you on board their team? 

Sabotaging Your Approval by Ignoring the Process & Timelines

Some franchise restaurant buyers come to We Sell Restaurants and simply don’t believe they have to follow the laid out application process.  A brand says they want to see proof of funds first and the buyer says, I’ll show it when we’re further down the road.  The franchise requests that every partner be available for the Discovery Day and only one of the two attends.  The brand says all the paperwork to attend Discovery Day must be submitted by the first and they get it in on the 10th.

A franchise is based on a business process, a shared set of systems and an approach to the industry that generates the fastest route to success.  For many brands, it’s not about the results of each step in the process, it’s that you can follow directions and execute to a planned outcome.  Think about it.  If a franchise restaurant requires consistency across locations, why would the brand welcome you with open arms if you are in fact, a maverick that simply wants to do it your own way?  If you want to keep from sabotaging your approval, follow the process, in order and in a timely manner.

Sabotaging Your Approval by Asking for Concessions First!

 As a restaurant broker, I have to admit that even I am shocked by this one but I see it at least once in every twenty or so transactions.  Buyers will have their first call with the franchise and despite having been prepped up front to understand the length of training or the menu items or any manner of things, they immediately begin complaining (and negotiating) about these items on their first call with the brand.

Is it possible to get concessions related to the time of training or the menu items or the service of alcohol or any other item a buyer may have on their mind?  The answer is…sometimes.  The time to raise these issues however is not on the first call. Think about this like a first date or a “getting to know” you call.  Any item you want to attempt to negotiate should be much further down the road in discussions.  For example, a requested one on one with Operations at your Discovery Day may be a time to bring your resume and point to your relevant experience and ask for a shortened time frame for training.  But just as you would never tell a first date, that having five kids is part of your life plan and it’s a “take it or leave it” proposition, hold any thoughts on concessions until the franchise has met you, decided they like you and have offered to have you come on board.  You’ll be much more successful on the “ask” and keep from shooting yourself in the foot on being approved in the first place.

Avoid these three ways of sabotaging your franchise application and you are well on your way to approval.  Fall into the trap of one of these and you should go ahead and start looking at other brands. Looking for a franchise restaurant for sale?  Check out our inventory at these links.

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Topics: buying a restaurant