At some stage of running a successful franchise an owner will want to relinquish control and remove themselves from the business. This is why a well-planned and carefully executed exit strategy is so important. Not only does it put the franchise owner in complete control, it helps to secure the future of the business and will also ensure the very best sales price.
This process is also known as succession planning. The owner identifies when the very best time will be to sell the franchise making sure it is in the best position possible for new ownership. This will require the business to be working at the very highest levels of profitability, well documented operating processes and well-presented accounts.
The key area to all of this is time. It should be planned well in advance and can often take 2 to 3 years to complete so at no stage should it be rushed.
There are several important steps to take as part of the exit strategy:
- Identifying the right business professionals who can take over the ownership of the franchise is crucial. A shortlist should be drawn up and it should not be about who will pay the most money but who will make sure the franchise continues to grow.
- Specific timescales should be put in place. There will need to be a successful handover period and ongoing support should remain in place for at least the first 12 months.
- Business accounts should be accurate and well maintained. They need to show how successful the franchise has been for at least the previous 3 years and demonstrate the highest levels of profitability.
- A future owner will only want to take over a franchise if they have everything they need to continue with its success. They will require accurate operating manuals. Documenting everything that happens within the business makes for a smooth and seamless transition.
- Everything possible should be completed to secure the very best sales price for the franchise. If there are problem areas causing concern, then they should be quickly addressed and resolved.
- Finally, the current franchise owner should seek specialist and independent help to make sure everything is correct and accurate. A fresh set of eyes and impartial guidance will bring broad benefits and a fresh perspective.
There are many reasons for starting a new franchise but ultimately there is only one reason for looking to exit – to generate as much income as possible. Planning early and developing an exit strategy will ensure this happens.
If you would like to know more about the benefits of an exit strategy or in fact to discuss anything in regards to franchising, please feel free to call us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk.