RESALES
managing their exit. A total hands-off approach doesn’t work either, as this is merely abdicating responsibility for the structured development of the network. With a hands-off approach, there is a loss of control over who is joining and how the brand is being promoted (or not) in the marketplace.
“For the majority of franchisees, this final part is an alien concept”
A resale is a challenge, yes, but one that can
be overcome and even turned to advantage through detailed planning and by following a structured system, involving the franchisees in their own forward planning. Establishing a franchise resales system within the operating and procedures manual (in whatever format) and encouraging franchisees to think about their final exit from the network – several years in advance of executing that exit – is the secret to franchise resales success. Franchising is about franchisees following
systems and operating processes and a franchise resales process should be part of that, whether driven in-house or by an external expert firm. Start to discuss the subject of selling the business and when they will wish to finally exit during the recruitment process. This gives focus to their time as franchisees and can form the basis of an ongoing business plan, providing a route map for the growth of their business. For example: “You want to move on in seven years’ time and your ideal selling value will be £XXX, which means in order to achieve that price you will need to be generating £YYY in profit. To generate that level of profitability, and sticking to our methodology, you need to achieve £ZZZ in sales and this means the following level of marketing/promotional activity each month, etc...” This gives the franchisor control from day one and manages the expectations of the franchisee about what they have to do to achieve their goals. It also ensures that the risk of any ‘sudden surprises’ in the form of an unexpected franchise resale are minimised. Open discussions about the eventual sale
of their businesses at regional meetings and conferences will also keep this mutually beneficial focus. Rather than broaching the topic themselves, with the attendant risks to existing relationships, franchisors can use an external specialist to provide guidance and perspective to the discussion, and I have often spoken at enlightened franchise network conferences.
Selling a business is about planning, more planning and constant, consistent, managed communication. It is this that will smooth the path for the successful completion of a franchise resale. n
DERRICK SIMPSON
Derrick is the managing director of Franchise Resales Limited, a company that specialises in delivering resale transactions for franchisees and franchisors. He has played an active role within UK franchising since 1988.
Franchisor News | 43
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