How to plan a successful exit strategy

Having a defined end goal will ensure a smooth departure once your time as a franchisee is up

When starting out on your franchise journey, it’s quite common not to give a second thought to your exit strategy.

And why would you? It’s an exciting time when all your focus should be on building your new business, not thinking about how you’re going to leave it. Well, yes and no.

Monumental impact

When you write your business plan, you know that it will need to change and adapt over time, but having a defined goal at the end will have a monumental impact on your strategy of how to get there.

One of the most attractive aspects of franchising is the chance to build a business that not only provides you with a regular income but also appreciates in value and becomes an asset for your future.

This is not always the case for those who choose to go it alone. Franchisees have a brand, systems, a defined territory and ongoing training and support - in other words, much more than notional goodwill and a customer database.

However, the actual resale value of a franchise will depend very much on how the franchisee has run the business.

Let’s say your goal at the start is to pass the franchise onto your children. There are lots of things to consider, including how you’re going to get the business to the size, turnover and profitability it will need to be to support them when they take it over. Also, bearing in mind that the franchisor will likely have the final say on who you can sell or pass the business to, how are you going to ensure they’re up to the required standard when the time comes?

What if your goal is to sell the business after 10 years and make enough money to comfortably retire? Sounds great, but if you don’t keep your focus on the eventual sale value of the business you might get there and find you need another 10 years to get to where you actually need to be.

Having a solid exit plan allows you to check in regularly on how you’re performing against that ultimate target.

The practicalities of selling

What are the practicalities of selling your franchise?

You’ll probably find it to your advantage to share your exit plan with your franchisor from the outset, but your franchise agreement will dictate a minimum required notice period of your intent to sell or pass on the business.

As mentioned, the franchisor will have to approve the new owner just as it would a new franchisee, so springing your intentions on the brand at the last minute is unlikely to work in your favour.

Also, your franchisor might well have someone in mind for your territory from its recruitment pipeline or perhaps even a neighbouring franchisee.

Working together towards a mutually beneficial exit would always be the best advice - remember you’re part of a network of franchisees and the timing and manner of your departure will have an impact on all of them too.

Judging the sale value

What about judging the sale value of your franchise? There are a number of formulas used in the sector to value a business and it’s wise to seek professional advice to help you assess yours and package it properly for sale.

The bottom line is it’s far better to have a clear exit strategy from the outset and work towards it, as opposed to trying to figure one out when you get there.

The author

Suzie McCafferty is CEO of franchise consultancy Platinum Wave.