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When contemplating the exit of a franchise business, it may be simple to imagine the rationale for exiting is because of considered one of two prospects: Both the enterprise was so profitable that somebody made a proposal to buy it, or it was such a failure that the proprietor needed to “get out.” As with most issues, the true reply is usually extra sophisticated. There are many different causes somebody may be trying to exit their enterprise.
Within the pleasure of beginning a franchise enterprise, an exit technique is steadily missed, regardless of its significance within the planning course of. That is comprehensible since we normally don’t love to consider the top of a journey earlier than it is begun. Nevertheless, throughout my years as a franchise advisor and franchisee, I discovered the significance of having an exit strategy in place. One of the best factor you are able to do? Plan forward so you are not making crucial future selections below duress.
Optimize your exit worth by planning earlier than a serious change forces your hand. Widespread causes individuals exit a franchise embrace:
- Getting a job supply they cannot refuse
- Deciding they’re prepared for retirement
- Experiencing a serious life change (divorce, household change or sickness)
- Receiving an unsolicited supply for a profitable enterprise
- Selecting to accumulate or increase in one other enterprise
- Breaking apart with a enterprise associate
- Monetary struggles in an present enterprise
For this final purpose, it is necessary to do not forget that simply because the enterprise did not ship the outcomes desired by the franchisee, it doesn’t suggest there isn’t any worth. It is common for enterprise homeowners having hassle working a enterprise to promote it to a brand new proprietor who can step in and make it profitable. In any case, preliminary efforts by the unique proprietor have probably shortened the launch ramp for a brand new purchaser, together with crucial and time-intensive startup duties corresponding to securing a business lease, procuring tools and stock, recruiting and coaching workers and constructing a buyer base.
With all that in thoughts, listed here are 4 methods you possibly can exit your franchise.
1. Via the franchisor
This selection is determined by the maturity of your franchise system. For instance, say your franchise model has been round for 40 years. On this situation, they might have a whole crew devoted to resales, together with particular packages in place to work with lower-performing areas to encourage them to cycle out. Alternatively, say the system is a youthful franchisor — on this case, the model could not have a resale crew in place, however they might nonetheless have relationships with brokers or consultants to help you in a sale. The primary level right here? Do not maintain your franchisor in the dead of night — you and the franchisor have aligned pursuits (what’s good for you’ll probably be higher for them in the long term).
That mentioned, protecting open communication with the franchisor doesn’t imply they may remedy the issue for you, however there will probably be extra choices obtainable in case you are clear.
2. Rent a enterprise dealer
Promoting a enterprise will all the time take time, but when it is advisable to transfer extra rapidly (promote in six to 12 months), the very best chance of success typically lies in hiring a business broker in your space. The good thing about working with a dealer is their business data and entry to a big database of patrons in your native market. It is their enterprise to ship out alternatives to their massive community of potential patrons steadily.
Enterprise brokers are professionals at conducting transactions — to allow them to additionally join you with different individuals who will assist with the method (attorneys, due diligence, closing, escrow, and many others). Take into account: Like an excellent actual property agent, they’re probably on the lookout for an unique itemizing. These agreements are sometimes in place for 12-month phrases, though phrases are sometimes negotiable. You may additionally have the ability to negotiate price exclusions for particular patrons corresponding to promoting to a different franchisee, and many others.
How a lot are the charges? The charges will probably be a share of the ultimate sale — anticipate this to be as a lot as 10% or a minimal flat charge on smaller sale transactions.
3. Go it alone and promote your self
On the finish of the day, there may be nothing that claims you possibly can’t attempt to sell your franchise independently. Possibly you may have prospects that love your small business and would dream of proudly owning it at some point. Sometimes, even should you weren’t fascinated with promoting, somebody could method you and put in a proposal. On this case, you possibly can rent an legal professional and forgo the dealer course of (win-win).
Whereas this will seem to be an interesting possibility, there are some things to think about. If you do not have a available purchaser, it takes a considerable quantity of selling to advertise your small business of sale. For instance: Take into consideration promoting your own home with out an agent — not as many individuals will see it and you will have to pay a purchaser’s agent regardless. The primary problem in promoting independently is having the ability to discover prepared, keen and in a position patrons.
4. Contact a franchise advisor
A lesser-known possibility could also be to contact a franchise consultant who works together with your franchise model (select a franchise advisor who’s a part of a nationwide community in your market). Whereas they most likely do not have as massive of a neighborhood database as a enterprise dealer, they’ve a gentle stream of patrons trying to begin a franchise enterprise. They could have present candidates or former candidates that align together with your model. And although they might not have as massive a neighborhood database of a enterprise dealer, an skilled advisor residing in your market might have attainable patrons for you — however anticipate that any charges required are paid by you, not the franchisor. A franchise advisor will not be a silver bullet, however it’s price having a dialogue.
Finally, there isn’t any one-size-fits-all course of for establishing an exit technique, however it’s necessary to do the analysis early so you are not making any hasty selections from a place of duress.