The Importance of Franchise Resales
Eventually a franchisee may consider to exit from his/her franchise business and this may be the result of a number of reasons. Most frequently when a franchisee decides it is time to sell their franchise opportunity; the reasons are based on the following four examples:
1) The age of the franchisee (perhaps retirement);
2) The expiration/duration of the Franchise Agreement;
3) Profitability (huge or lack of…);
4) And finally perhaps “boredom” brings a franchisee to a selling decision.
(Source: Franchise Resales in Franchisenews, [August 2007, p. 34])
What is important, no matter the reasons for the franchisee’s decision to sell, is that the franchisor in question MUST approach the situation with positivism and accept the fact that his/her franchisee wants to move on. A franchisor should not discredit the franchisee’s reasons and above all should not leave the franchisee to sell the business on his/her own terms.
The franchisor must be part of the selling process and will be influential in deciding who will take the existing franchisee’s place. Secondly, a franchisor should not devote all of his/her time and energy in helping the franchisee locate a suitable owner as this could end up costing the franchise business quiet a lot of money and time wasted.
Instead a structured plan should be implemented by the franchisor from the very beginning of the franchise relationship, to deal with the eventuality of franchise resales. This plan should be discussed with all future franchisees in order to establish good relations and communication links between both parties involved from the word "go"!.
So how do you get franchise resales right, first time around?
Through strategic or long-term planning both a franchisor and franchisee can overcome the possible situtaion of franchise resales with the implementation of a structured plan. As Derrick Simpson, leading expert in franchise resales points out: "Franchising is about systems and operating processes for franchisees, so a resales process should be part of that system from the very beginning". (Source: Franchise Resales in Franchisenews, [August 2007, p. 34])
If both parties follow through the next steps in this process, the franchise resale can be quiet a manageable and successful operation…
1. Discuss selling the business and when the franchisee expects to finish up, during the initial stages of the franchise recruitment stage. This will help you as a franchisor to get everything “out in the open” in the beginning and ensure both you and the franchisee know when "enough is enough". This issue should be stated or recognised as one of the clauses within the Franchise Agreement and will protect the franchisor from future franchise tensions.
Safegaurding a franchise network is imperative if the franchise business is to remain profitable. A franchisor must trust his/her franchisees and vice versa. Establishing strong communicative links from the early stages of the franchise process is essential to the future business success of both parties involved.
2. Open discussions about the eventual sale of a franchise business at regional meetings, conferences, coffee lunches etc will also foster good relations between franchisor and franchisees. External specialists on the subject of franchise resales can be invited in to these conferences to speak on behalf of the franchise company and in this way, it creates fresh perspective and results in effective relationships between all parties involved.
3. From the franchisee's perspective, they must consider franchise resales well in advance, and preparing for "future eventualities" is a must if you are investing in a franchise business in the first place, so this extra demand on your organisational abilities should not come as a suprise, when you have to consider creating a franchise resales package three years in advance of a possible franchise resale. You will have to put together a comprehensive resale package which will consist of management accounts and other business documents, which can be discussed in advance with the franchisor.
Again forward planning and discussion will go a long way in smoothing over tense situations and help create a successful business resale...