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When considering exiting a franchise business, it is easy to assume that the reason for exit is due to one of two possibilities. Either the business was so successful that someone offered to buy it, or it was so unsuccessful that someone offered to buy it. The owner had to “get out.” As with most things, the actual answer is often more complicated. There are many other reasons why someone might want to exit a business.
Amid the excitement of starting a franchise business, an exit strategy is often overlooked despite its importance in the planning process. This is understandable since we don’t usually like to think about the end of a journey before it begins. However, in my years of experience as a franchise consultant and franchisee, I have learned the importance of having an exit strategy. What is the best thing you can do? Plan ahead to avoid having to make important decisions in the future.
Plan and optimize exit value in front Big changes force your hand. Common reasons for terminating a franchise include:
- Get a job offer you can’t refuse
- Deciding you are ready to retire
- Experiencing a major life change (divorce, family change, illness, etc.)
- Receive unsolicited offers for business success
- the choice to acquire or expand another business;
- Farewell to business partner
- Financial difficulties in existing business
Finally, it’s important to remember that just because a business fails to deliver the results franchisees desire, it doesn’t mean it’s not worth it. It’s common for business owners who are having trouble running their business to sell it to a new owner who can step in and make it successful. After all, initial efforts by the original owners included significant and time-consuming start-up tasks such as securing a commercial lease, procuring equipment and inventory, hiring and training employees, and building a customer base. The time to launch for new buyers may have been shortened.
With all this in mind, here are four ways you can exit your franchise.
Related: 6 things to consider when terminating a franchise agreement
1. Via the franchisor
This option depends on the maturity of your franchise system. For example, suppose a franchise brand has been in existence for his 40 years. In this scenario, an entire team is dedicated to resale and may implement special programs that work with underperforming stores to encourage them to cycle out. Or suppose the system is a young franchisor. In this case, the brand may not have a reseller team in place, but it may still have relationships with brokers and consultants who can help with sales. Is this the important point? Don’t hide secrets from your franchisor. You and the franchisor have aligned interests (what’s good for you will likely be good for the franchisor in the long run).
That said, maintaining open communication with your franchisor won’t make your franchisor solve your problems, but transparency can give you more options.
2. Hire a business broker
Selling a business always takes time, but if you need to move more quickly (sell within 6-12 months), hiring a business broker in your area is often the most successful option. has the highest gender. The advantage of working with a broker is their industry knowledge and access to a large database of buyers in the local market. It is their job to frequently send out opportunities to a large network of potential buyers.
Because business brokers are experts in conducting transactions, they can also connect you with others who can help with the process (attorneys, due diligence, closing, escrow, etc.). Keep in mind: Like any good real estate agent, they may be looking for exclusive properties. These contracts are often concluded for a period of 12 months, but the terms are often negotiable. You may also be able to negotiate fee waivers for certain buyers, such as sales to another franchisee.
How much does it cost? The commission is a percentage of the final sale price. Expect this to be up to 10%, or a minimum flat fee for smaller sales transactions.
3. Sell yourself by going it alone.
After all, there’s no reason why you shouldn’t try to sell your franchise independently. You may have customers who love your business and dream of owning it one day. In some cases, someone may approach you and make an offer even if you weren’t thinking of selling. In this case, you can hire a lawyer and skip the mediation process (win-win).
While this may seem like an attractive option, there are some things to consider. If you don’t have a ready buyer, you’ll need a significant amount of marketing to drive your selling business. Example: Consider selling your home without an agent. It won’t be seen by as many people, so you may have to pay a buyer agent. The main challenge when selling independently is being able to find a ready, willing and capable buyer.
Related: Before you enter a franchise, consider exiting it
4. Contact a franchise consultant
A lesser-known option is to contact a franchise consultant who is affiliated with your franchise brand (choose one who is part of a national network in your market). Although they probably don’t have as large a local database as a business broker, they do have a constant stream of buyers looking to start a franchise business. There may be current or former candidates who are aligned with your brand. Also, while a business broker’s local database may not be very large, they may have experienced consultants stationed in your market who can find buyers for you. However, expect to pay any required fees by you, not the franchisor. A franchise consultant may not be a silver bullet, but it’s worth a conversation.
Ultimately, there is no one-size-fits-all process for developing an exit strategy, but it’s important to do your research early to avoid making hasty decisions from a position of duress.
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