Exit Plan Options for Franchisees
Dec 12, 2023
Why did you get into franchising? Maybe you wanted to have financial freedom. Or perhaps, it was time freedom you were after. The majority of franchisees wanted to have both. You should use this desire as the fuel that motivates you through your franchise journey.
- But franchises are not forever, and at some point in time, the franchise adventure is going to end.
As strange as it may sound, you should also keep this in mind, especially since you're going to spend a lot of time, effort, and money on building an enterprise as your legacy. So, you constantly must think about where you want all your hard work to go, and to be, once you are not behind the business operations anymore.
Regardless of your motivation to buy a franchise, you should always think about your franchise exit strategy to ensure that, when the time comes, you can still maintain your time and financial freedom.
Don’t miss this mini tip to achieve time and financial freedom
These are three options for a franchise exit plan. Analyze each of them and once you have selected the most suitable for you, start taking the necessary steps to prepare for it.
1. Sell or inherit to your children
This is what the majority of franchisees do: inherent or sell their enterprise business to their children. But sadly, not many of them want to take over the franchise so before taking this option, you need to be aware of this.
Although they may be adults, your children might not be prepared to run the business successfully. This could potentially destroy or minimize your legacy, and you don't want to do that!
If you are lucky enough that your kids are interested in continuing with the business, there are a couple of things you need to take into consideration:
- They may not know how to manage the business
- They are not prepared to take over the company
Although they may be adults, they might not be prepared to run the business successfully. The lack of business management and proper training has the potential to destroy what you’ve worked so hard for.
That’s why, if your children are truly committed to the enterprise's future success, you should get them involved in the business as soon as possible, starting from the bottom. Only then, they will truly understand the franchise operation and make the proper decisions when they take over, to protect the legacy you have built.
Something else you should know about this option is that while you're still around, you won’t have total freedom. Especially if your kids are not properly prepared to run the business without you, you'll have to be involved, and help and guide them along the way, at least for the first few years.
2. Hire an experienced operations manager
Another exit strategy you can implement is to hire an experienced operations manager, with a successful business management record, who can take the reins of your business so you can fully delegate the business to them.
This plan implies that you're not really exiting because you're still the owner and you’ll have someone to take over your role of managing the business so you can be much less involved in the day-to-day operations.
As with the first option, there are some things you have to consider if you choose this franchise exit strategy:
- You will find yourself with passive income because you're going to have an experienced operator running the organization so you can have the freedom to travel, relax, do your hobbies, or spend time with the family.
- The business results might go down even though this particular operator may be great at running the operations. Why? Because they might not be as committed as you are as a business owner.
You must also know that you won’t have total freedom because you need to keep an eye on your business to make sure that things are going as they should.
3. Sell to a third party
The third strategy exit is to find a third-party organization to whom you can sell your franchise completely.
This would mean putting all of the hard work that you have done in the past years, maybe even decades, in the bank, cash out. It would also give you total freedom as well as financial benefits and a true way to relax and have time to enjoy the fruits of your efforts.
By choosing this option, you won’t have to worry about your family running the business and still try to support them. Or overseeing an operating manager to make sure everything is good. However, it is important to note that the new owner might ask you to stay on board for a little while.
Despite these benefits, this exit strategy might not be for you especially if you still want to be involved in the business.
But if you opt to sell to a third party, you have to make sure you get the most out of the transaction! You can ensure this by making your business as attractive as possible and increasing its value to potential buyers as much as you can.
Watch this useful video content: Increase the value of your franchise
No matter what your exit plan is, what’s truly important is that you prepare your business, and your family and leaders, for when you are no longer here.
Sadly, when business owners pass away unexpectedly and without a proper plan of what should happen, the mess they leave behind can not only destroy their companies but also their families. So, I urge you to make a special plan for when you are not here, whether it is through a will or a trust, so that your loved ones know what to do with your business and your money.
- This will surely protect the legacy of your business and truly care for your family.
Regardless of the exit plan you choose, there’s a truth: if you have your business systems in place so the franchise can run without you, you’ll have more chances to increase its value and set it up for the people who will be in charge, which will also help them continue its success.
You can learn more about how to increase the value of your business with our Command Program, designed for franchisees who want to implement the business management systems they need so they can delegate operations, increase profitability, and prepare themselves for the next step in their franchise journey.
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Reflections:
- Which of these exit strategies is more suitable for you?
- Are your children interested and committed to the long-term success of the company?
- How much involvement do you want to have in the next phase of your franchise?
- Are you currently able to delegate operations or not?
WATCH THIS VBLOG on YouTube HERE.
