Want to leave your franchise business behind?  4 Exit Strategies to Consider

Want to leave your franchise business behind? 4 Exit Strategies to Consider

Opinions expressed by entrepreneurial contributors are their own.

When considering the exit of a franchise business, it can be easy to assume that the reason for the exit is due to one of two possibilities: Either the business was so successful that someone made an offer to buy it, or it was so unsuccessful that the owner “had to get out.” As in most cases, the real answer is often more complicated. There are many other reasons why someone might want to quit their job.

In the excitement of starting a franchise business, an exit strategy is often overlooked despite its importance in the planning process. This is understandable, because we usually do not like to think about the end of a journey before it begins. However, in my years as a franchise consultant and franchisee, I have learned the importance of having an exit strategy. The best thing you can do? Plan ahead to avoid making future critical decisions under duress.

Optimize your output value by planning before a big change forces your hand. Common reasons people leave a franchise include:

  1. They cannot refuse to receive a job offer
  2. Deciding they are ready to retire
  3. A major life change (divorce, family change, or illness)
  4. Getting an unsolicited offer for a successful business
  5. Option to acquire or expand another business
  6. Breaking up with a business partner
  7. Financial struggle in an existing business

For this last reason, it’s important to remember that just because a business isn’t producing the results the franchisee wants, it doesn’t mean it’s not worth anything. It is common for business owners who are struggling to manage a business to sell it to a new owner who can step in and succeed. After all, the first owner’s initial efforts are likely to speed up the startup for the new buyer, including critical and time-consuming start-up tasks such as securing a commercial lease, purchasing equipment and inventory, hiring and training employees, and building a customer base. shortened.

With all that in mind, here are four ways to exit your franchise.

Related: 6 Things to Consider When Exiting a Franchise Agreement

1. Through the franchisor

This option depends on the maturity of your franchise system. For example, say your franchise brand has been around for 40 years. In this scenario, they may have an entire team dedicated to remarketing, including special programs to work with underperforming locations to encourage them to cycle. Alternatively, say the system is a younger franchisor – in this case, the brand may not have a resale team, but they may still have brokers or consultants to help you sell. The main point here? Don’t keep your franchisor in the dark – your and your franchisor’s interests are aligned (what’s good for you will be good for them in the long run).

However, being open with the franchisor doesn’t mean they will solve the problem for you, but being transparent will give you more options.

2. Hire a business broker

Selling a business will always take time, but if you need to move faster (selling in six to 12 months), the best chance of success is often in hiring a business broker in your area. The advantage of working with a broker is their industry knowledge and access to a large database of buyers in your local market. It is their job to send frequent opportunities to a large network of potential buyers.

Business brokers are professionals at handling transactions – so they can connect you with other people to help with the process (attorneys, due diligence, closing, escrow, etc.). Remember: Like a good real estate agent, they are likely looking for an exclusive listing. These contracts are often for 12 months, although terms are often negotiable. You can also negotiate fee exceptions for specific buyers, such as selling to another franchisee.

How much are the salaries? Fees will be a percentage of the final sale – expect it to be up to 10%, or a minimum flat rate on smaller sales transactions.

3. Go it alone and sell yourself

At the end of the day, there’s nothing that says you can’t try to sell your franchise independently. Maybe you have customers who love your business and dream of owning it one day. Sometimes, even if you don’t intend to sell, someone may approach you and make an offer. In this case, you can hire a lawyer and opt out of the brokerage process (win-win).

While this may seem like an attractive option, there are a few things to consider. If you don’t have ready buyers, a significant amount of marketing is required to promote your sales business. For example: Consider selling your home without an agent – not many people will see it and you may have to pay a buyer’s agent. The main challenge in independent selling is finding ready, willing and able buyers.

Related: Before Franchising, Consider Your Exit

4. Contact a franchise consultant

A lesser-known option may be to contact a franchise consultant who works with your franchise brand (choose a franchise consultant who is part of a national network in your market). They probably don’t have as much of a local database as a business broker, but they have a steady stream of buyers looking to start a franchise business. They may have current candidates or past candidates who fit your brand. While their business broker’s local database may not be as large, an experienced consultant based in your market may have potential buyers for you – but expect that you, not the franchisor, will pay any fees required. A franchise consultant may not be a silver bullet, but it’s worth discussing.

Ultimately, there is no one-size-fits-all process for building an exit strategy, but it’s important to do your research early so you don’t make hasty decisions from a position of pressure.

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