Woozelbears – Canine Hydrotherapy
The Woozelbears brand was beginning to grow, Charlotte – the franchisor, had recruited five franchisees by the time she had made her initial enquiry to sell on the 9th of July. Charlotte’s Witney branch was the initial operation of the Woozelbears network.
Due to the location of the site being a 5-hour journey from Charlottes home, she made the decision to sell her franchise in Witney in order to progress the company via the franchising route as she was going to need money to invest in more potential franchisee’s.
The Beginning – Valuations and Listing Agreements
Charlotte chose Franchise Resales due to a recommendation by one of our funding partners; she says, “I chose the company based on a recommendation from franchise finance, there isn’t another company that provides this service and they were responsive to my enquiry.”
Franchise Resales Lead Manager, Keith Halsall, initially dealt with Charlotte’s enquiry to sell. He provided a Market Appraisal on the business which supplied her with a price to sell. Keith had to work with Charlotte whilst completing the Market Appraisal as the accounts were complex due to other business ventures. Together, they generated a price which both parties were happy with.
Being a relatively new franchise brand, which operates within a specialised sector, made the valuation moderately subjective. As Charlotte herself states, “Initially you always over value your business as the owner, and really, it’s only worth what someone will pay for it in the current market. With it being a niche business, I knew it would be harder to find a buyer than your standard franchise.” Charlotte and her accountant valued the business at £220,000 with an asking price of £240,000. Franchise Resales believed this figure was above market price due to it being a brand with little history and never having had a resale to gauge against. Keith was happy to list the business at Charlotte’s desired asking price, with the provision that if the market feedback shows that the price is too high, we could lower it.
Advertising was a concern for Charlotte, primarily about finding a specialist buyer via broker websites. Franchise Resales and Charlotte came to a mutual understanding that if a buyer was found through direct advertising at dog shows, then no completion fee would be charged.
After several phone calls, Charlotte agreed to our terms and conditions and the listing agreement was sent out for signing. Circumstantially, we can be flexible with requests – Charlotte asked if we could put a special term in our agreement regarding finding a buyer from a veterinary exhibition. Charlotte said, “If I found a buyer from a veterinary exhibition, I asked for the fee to be reduced.” Franchise Resales agreed to her request and the Listing Agreement was signed at the end of July 2018, and the initial setup fee was invoiced and paid.
On the 27th July 2018, Keith sent out our Prospectus Information Form to Charlotte for completion. This is a form that the seller completes in order to provide us with a true understanding of the business. Once we have this information, we produce a Prospectus of Sale which provides buyers with all of the information they require to make an informed decision about potentially purchasing the business.
On the same day, a coming soon email was distributed to our database of potential buyers. This is a quick, vague email; it includes the business name, sector and general location. The concept of the coming soon email is to arouse initial interest so that when the Prospectus information form is back, we are able to contact the initial enquiries immediately, prepared with any information they may request.
Charlotte was pleased with our prospectus, stating that, “the prospectus was professional and well put together. I was pleased with the outcome and very few changes were needed to present it to the public. We did review it once during the process to keep it current.”
Occasionally, during this part of the process there can be some teething issues. Whether it’s from not enough information inputted into the forms, lack of clear communication, or a difference of expectations. This instruction was no different, in the early stages of our relationship with Charlotte there were a few minor issues that came to light. We had changed an internal process and unfortunately, the business was not advertised as quickly as we both would have liked. The issue was swiftly resolved by one of the Directors, Michael Bohan. The business went live on external websites at the beginning of September and New Instruction Emails went out three times over the next 6 weeks.
Lead Enquiries and NDA’s
Over the next couple of months, leads were few and far between; none of which were looking promising. However, on the 15th November 2018, we had an online enquiry from Darren Brown. Franchise Resale’s Lead Enquiry Trainee, Ellie, dealt with the enquiry and sent an email to Darren informing him that an Account Manager would contact him and attached Franchise Resale’s Top Ten Tips for Buyers, and the Buyers Guide to Buying a Franchise Resale.
During the initial telephone conversation, Darren explained his situation and why he was interested in Woozelbears. Darren had 25 years’ experience working in Blue Chip companies, finishing his last senior role at the end of 2018. Darren had some equity behind him, meaning that he had the opportunity to buy into a business. He explained that he was interested in a business that he could develop and had growth potential. It was essential that he would be buying into a sector where there would be genuine interest for himself and his wife to become involved. Ellie was pleased with what Darren had said and agreed to issue an NDA (Non-Disclosure Agreement). All potential buyers through us have to be qualified and sign an NDA to receive any information on the business/es they enquire about.
On the 30th November 2018, Darren signed the NDA and was passed over to our Relationship Manager, Patricia Hayward, to receive more information, the financials and the business’s accounts. Darren could not progress any further until his current job contract had finished, also, with Christmas around the corner, Patricia and Darren agreed to cease contact until January 2019.
Darren states, “I found Patricia to be respectful and helped chased things along without being too pushy. It was clear she only had limited knowledge about the business and the accounts, so it was good that there was a deeper level of knowledge and support within Franchise Resales to guide me through the process.”
In January 2019, following conversation with Patricia – Darren agreed to fill in one of our Profile forms. This is a form that we ask buyers to complete in order for the franchisor to gain a good understanding of who they are. The franchisors needs to acquire personal information about the potential buyer interested in joining their network. Until a Profile form is completed by a buyer, we will not arrange a meeting between the buyer and franchisee/franchisor. Franchising is a process; if the buyer is unwilling to fill out the profile form, then how likely are they to follow a franchisors processes when they are in the network.
On the 5th February 2019, Darren returned his Profile form and Patricia arranged for him and charlotte to have an initial meeting on the 7th February 2019 at the Witney branch.
Darren said of his meeting, “It was good to meet up with Charlotte at an early stage to help us get a feel for the business and Charlotte who as the franchisor will continue to play a major role in the business. The meetings we had were very open and informal and it was clear there was a mutual level of interest. I was impressed with what Charlotte has achieved and importantly what I felt she could also go on to achieve. She is clearly a classic entrepreneur, with lots of energy to get things done. It was clear that the business had expanded to a point where some further management support and different thinking could be beneficial for future development, which was another big plus for us.”
The negotiation process is not as straight forward as it may seem, The team at Franchise Resales endeavours to work on behalf of the buyer and seller to make the transaction as smooth as possible. Darren says, “I think the negotiation period was longer and more complex than I expected, but I think much of this was driven by the fact that the future business structure was being devised as negotiations went along. It was not a simple acquisition of a going concern. I felt your role was pivotal in helping both sides try and balance an agreement. At times it was looking like it would fall through, but unquestionably your communication and willingness to try and find solutions helped to get things over the line. I did feel the process of establishing a Memorandum of Understanding before moving to the legal stage was invaluable and helped to ensure the legal process, although quite involved, did have the benefit of working to a clear framework of agreements.”
The legal process to completion
The negotiation stage is a critical part of any deal; this is where the Account Manager takes control over the proceeding negotiations. We request all offers to be in writing – preferably via email, it’s not a legal binding document – it’s an offer of intent to buy. Darren made his offer via email on the 4th April 2019, the original offer required negotiating and the final offer, following three months of negotiations, was agreed on the 1st August 2019. Darren had done a lot of due diligence himself, which would normally be done by a solicitor, to keep fees manageable. But at last, the deal has been completed and legal process complete!
Speaking of his experience through the negotiation and legal process, Darren says, “Based on previous experiences, I had expected this process to be lengthy and given the construct of the agreement and the changing company structure and loan guarantees it was always going to be that way. That said, both because of the work put into the MOU and also because the 2 legal advisers where pragmatic and efficient, I did not feel the process was held up due to much additional legal negotiations and inefficiency’s which can often happen. I think the legal company recommendations from you turned out to be a big plus. The only niggle was that both solicitors were very busy with other clients so sometimes there were longer response times than I would like to have seen, but in my experience, this is sadly normal for legal companies.”
When asked about her working relationship with Franchise Resales, Charlotte said, “I think I could have done with taking more advice from other professionals along the way for ways to package the business up and negotiate ideas …The communication regarding negotiations were dealt with very attentively by Michael, morning, noon and night! He always gave the time that was required and positively progressed the sale at every stage.”
Darren states, “I believe your business played an essential role in the sale. I found you very easy to work with, prepared to listen and understand concerns and try and work to push things forward. I would also recommend your business to others.”