When I started working with Franchise Resales nearly 6 years ago, I suppose I thought exactly the same as most of the people we speak to when they think about resales… they must be selling it because it’s not doing very well.
However, this is not always the case, people buy franchises and then sometimes life can get in the way. Illness and family issues are often the reason for selling. This is fine if you’ve been there a while and got the business running well, but a bit of a bum deal if you’ve not been there long. There are also occasions when a franchisee will treat the whole thing like a job, and that can hinder the growth of a business too.
What we are seeing more and more is people making a lot of money and living what looks like the perfect life from the outside. But, here’s the rub, when a franchisee gets to a point where they are happily coasting along and there is little growth there, this too can affect the saleability of the business. The other point here, of course, is that franchisors don’t really want businesses that are standing still or worse going backwards because that will reflect poorly on the group as a whole.
If your franchisees are spending more time on the golf course than in their businesses who is driving it forwards? I’m not saying it can’t be done, I’m asking a question about franchisees drive. If they already have what they need, – not everyone’s drivers are monetary – why would they push harder for more?
On the flip side to that, why would a Franchisor rock the boat with their best franchisees? As I have often said, it can take up to 3 years to really get a business ready for sale. I can count on one hand how many times people have really planned there exit strategy to that degree. If the Franchisee wants maximum return on the business they will have to make it worth it.
Businesses are sold on history. History of the books and sales performance. It’s very different to buying a cold start where you are buying on potential. You have a situation with a coasting or failing franchise where the seller is saying “hey but it has the potential to do so much more” and the buyer is saying “well why hasn’t it then?” This really is where our process of getting buyers in front of franchisors, before they see the franchisee and the nitty-gritty of the business really make sense!
As a network develops getting new blood in from both ends is a perfect way to grow the brand. New franchisee’s whether they are taking on a new territory or buying a resale are always good for growth. From a resale perspective, it shows the saleability and ROI for the buyer.
We have been operating for over 10 years now, and we are starting to see businesses we have sold previously, coming back on the market in a stronger position and of course for more money. This means that the next buyer has a different kind of growth strategy for the business.
Some franchisors I know, have created a hub for their larger franchises to really push to the next level, offering different kinds of support and advice for the bigger businesses, this to my mind is such a great idea.
So suffice to say if any of your franchisees, including your top performers, come to you with an exit plan, don’t be upset, embrace it. You should get a new, hungrier franchisee taking the reins and driving that business to the next level, regardless of the reason for sale!