We just finalized the details on franchise #34
27 of our 34 locations have been acquired using seller financing.
It’s basically a cheat code for growth once you get into a franchise system
Seller Financing 101
The seller of the business becomes the bank.
We agree on the purchase price, down payment, interest rate, and number of payments.
The lawyers draw up three documents:
1) Asset purchase agreement—This outlines that we purchase the business’s assets, not liabilities. It is required in every single acquisition.
2) Note – details the interest rate, term, lender protection, and penalties if we don’t pay
3) Security Agreement—This doc identifies the collateral we’re using to back the loan. It gives the seller leverage if we don’t pay.
Once signed, we make our down payment and set up a monthly recurring ACH payment, and we’re done.
The seller gets all the same protections a bank would. If we stop paying, they can go after our assets, including taking the business back while keeping every penny we’ve paid.
Why would a seller finance it?
1) Higher price
2) Monthly cash flow
3) Defer taxes
4) Interest income
5) Quicker & easier
A franchise is a “closed system,” meaning you can’t just sell to anyone. The franchisor has to approve the buyer to ensure they meet their standards.
This complicates the sale as the buyers need to jump through two hoops: the seller’s deal and the franchisor’s.
Compared to selling to another franchisee who you’ve known for years and could be considered a friend…..
It’s an easy transaction if the franchisor approves the buyer for expansion.
Our current Midas footprint (#34 getting add on April 7th)
Getting your first seller-financed deal
Start building relationships with other franchisees.
Grab lunch next week. Talk about your expansion plans.
Plant the seed you’d like to be the first call if they consider selling.
I usually target the lowest performers first.
Repeat this with every franchisee in your market and adjacent markets.
This is 10 times harder if you don’t own a franchise yet. These deals are built around trust and they don’t know or trust you.
The good news is that you only need 1 unit to become a member of the club. Then, build relationships and expand through seller financing.
Book a free strategy call if you want my team’s help in this “build then buy” strategy.
We’ll help you identify a great brand and walk you through the process of buying your first franchise.
Cheers!
Brian
