how to make an exit strategy for a franchise

Creating an Effective Franchise Exit Strategy

• Choosing Your Exit Goal You can’t hit the bull’s eye unless you aim for it, so it’s important to understand your exit goals. Some franchisees are looking for tidy profits and clean breaks, while others are building a more active retirement. ...
• Timing the Exit Your franchise exit needs to be timed with the utmost precision, just like any stock or bond sale. ...
• Working for Profits ...

Full Answer

How to prepare for exit?

Why do franchisees leave?

What is the franchisee effect?

Why don't businesses survive to the second generation?

What is the key selling factor?

How effective is the Five Buckets approach?

What is effective succession planning?

See 4 more

About this website

What is the exit strategy of a franchise business?

Every franchisee (like any prudent business man or woman) should have a proposed exit strategy from their business. This may be a sale to a third party purchaser or a sale back to the franchisor or the individual franchisee's retirement from the business and his succession by a member of his family.

What are the 5 exit strategies?

Five Smart Exit StrategiesMerger & Acquisition (M&A). This normally means merging with a similar company, or being bought by a larger company. ... Initial Public Offering (IPO). This used to be the preferred mode, and the quick way to riches. ... Sell to a friendly individual. ... Make it your cash cow. ... Liquidation and close.

How do you write an exit strategy?

To plan an exit strategy that provides maximum value for your business, consider the six following steps:Prepare your finances. ... Consider your options. ... Speak with your investors. ... Choose new leadership. ... Tell your employees. ... Inform your customers.

What are the 4 exit strategies?

The four possible exit strategies are:Pass to Family.Sell to Outside Third Parties.Sell to Inside Key Employees.Planned Liquidation.

What should be in an exit plan?

Your Exit Plan must set goals, provide accountability and measure results. This is especially important when your goals are to protect and grow value, and minimize taxes. Incorporate Flexibility. Create an Exit Plan that is flexible enough to react quickly and effectively when the unexpected happens.

What are the 2 essential components of an exit strategy?

Your exit plan should be focused on two main objectives: 1) maximizing your company's value prior to your exit, and 2) ensuring that you accomplish all of your business and personal objectives as part of the exit. Sticking to your exit plan is just as important as having one.

What are the three main exit strategies?

Common types of exit strategies include initial public offerings (IPO), strategic acquisitions, and management buyouts (MBO).

What is a good exit statement?

“I feel undervalued in my current role.” “I'm looking for a new challenge.” “I want a job with better career growth opportunities.” “I had to leave due to family or personal reasons.”

What is an example of an exit?

Exit is defined as to leave or go out of. An example of to exit is to walk out of a door. A passage or way out. An emergency exit in a theater; took the second exit on the throughway.

What is the most common exit strategy?

Selling ownership of the company is one of the most common exit strategies. An acquisition exit strategy means that you give up the right to run your business. In many cases, you could sell your business for a higher price than it's worth, especially if you sell to a competitor.

What is a viable exit strategy?

A business exit strategy is an entrepreneur's strategic plan to sell their ownership in a company to investors or another company. An exit strategy gives a business owner a way to reduce or liquidate their stake in a business and, if the business is successful, make a substantial profit.

How do angel investors exit?

Angel Investors and their Exits If an investor “exits” then there are two scenarios: either the investor will have a profit or a loss and it also means the sale of the company that you have invested in either may be directly to a new investor through an IPO, private company, public company, or a private equity firm.

What is the most common exit strategy?

Selling ownership of the company is one of the most common exit strategies. An acquisition exit strategy means that you give up the right to run your business. In many cases, you could sell your business for a higher price than it's worth, especially if you sell to a competitor.

What are the three main exit strategies?

Common types of exit strategies include initial public offerings (IPO), strategic acquisitions, and management buyouts (MBO).

What is the best exit indicator?

The 6 Best Entry and Exit Indicators for Day TradersMoving averages.Bollinger Bands.MACD.Ichimoku Kinko Hyo.Stochastic oscillator.Relative Strength Index.

What is an example of exit?

Examples of exit in a Sentence Noun Use the emergency exit in case of fire. There are 12 exits in the building. We can't get out this way: the sign says “No Exit.” Verb The team exited the tournament early. Save your work and then exit the program.

4 Ways To Terminate a Franchise Agreement - LegalVision

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership. By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes.

On what grounds can a franchisor terminate a franchise agreement?

The information you submit via our enquiry form is shared only with the franchise business(es) that you have selected. The franchise business will contact you by means of email and/ or telephone only to the email address and phone number you have provided.

How Can I End a Franchise Agreement With a Franchisee? - LegalVision

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership. By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes.

Handling Defaults and Terminations Effectively | International ...

By Carmen D. Caruso and David A. Harpest. The Gathering Storm. Franchise terminations are not usually surprise attacks, but are instead the unfortunate culmination of a steadily deteriorating relationship, often with missed salvaging opportunities on both sides.

How to prepare for exit?

A better way to prepare for exit is to create a personal financial plan that includes a comprehensive succession plan. Succession planning is becoming prominent in franchising as some 80 million baby boomers approach retirement, the impact of which is felt by franchisors and franchisees.

Why do franchisees leave?

Many reasons for exiting include a better work/life balance, opportunities for “Act II” post retirement, and growing valuations which make an exit more attractive. Developing a plan three or more years before exiting is wise. Many franchisees wrongly assume this is a simple process. However, a multi-dimensional plan is required and can be complex to develop and implement.

What is the franchisee effect?

Franchisee effect: Includes the ability to negotiate an agreement that aligns your business goals with personal financial goals. Good financial planning analyzes variables such as number of units owned, valuation per unit, transfer taxation and sale.

Why don't businesses survive to the second generation?

Among the primary causes is failure to create and execute a management succession plan. Other factors include inadequate estate and liquidity planning.

What is the key selling factor?

A key sale structuring factor is taxation . There are two sales categories from a taxation perspective: assets and stock.

How effective is the Five Buckets approach?

Doing the proper planning towards meeting your life’s financial goals can create confidence and direction and lower stress. The “Five Buckets” approach can be highly effective. By creating a plan and refining it, a complex situation can be simplified and put you on the path to achieve your goals.

What is effective succession planning?

Effective succession planning is a custom-designed approach that maps how the owner intends to transfer his business. These could be to family members, another franchise owner, a third-party acquirer or private equity group or, the franchisor.

Choosing Your Exit Goal

You can’t hit the bull’s eye unless you aim for it, so it’s important to understand your exit goals. Some franchisees are looking for tidy profits and clean breaks, while others are building a more active retirement. Some hope to keep their returns within their families, and some prefer to achieve liquidity.

Timing the Exit

Your franchise exit needs to be timed with the utmost precision, just like any stock or bond sale. Fudge your preparations, and you may race right past your golden moment, headlong into a financial loss.

Working for Profits

Your resale is where you finally get to enjoy the fruits of your hard work, and your succession plan needs to be timed to lock in those profits. Every franchise niche peaks on its own schedule, so you’ll need to be aware of your timeline far in advance.

Why do franchisees want to sell their business?

Franchisees seek to sell their business for a variety of reasons including burnout, personal issues, retirement or new opportunities. Whatever, the reason, every franchise ought to have an existing exit plan whether the execution of the plan takes place or not. The Exit Planning Institute reports that: “Roughly six million privately held companies ...

Who can help with a formal exit plan?

Identify a qualified advisor who can aid in developing a formal exit plan. An advisor could be an experienced attorney, financial advisor or accountant, who can assist with the various implications and tax issues regarding the sale or transfer of ownership.

Is it hard to sell a business?

A marginally profitable business can be very difficult to sell, according to BizBuySell, only 20% of all businesses listed for sale actually sell. Finding a buyer on the open market can be a long process. Some businesses can be difficult to value, and the selling price may be much lower than expected.

Is a franchise subject to franchisor approval?

For franchisees, this issue is particularly important since unlike independent business owners, the sale of a franchise is subject to franchisor approval, that can require equipment and location upgrades, which in the case of certain franchises can be costly.

Should franchise owners have an exit plan?

Franchisees should have an exit plan in place to sell their franchise. A formal exit plan will enable the franchise owner to maximize the value of their franchise whether the sale is planned or not. Jeff Bezos To Step Down As Amazon CEO.

How to exit a franchise agreement?

Surrendering your franchise to the franchisor is the easiest and fastest way to exit your franchise agreement. They are under no obligation to entertain it, but it may be that the franchisor is open to the idea of allowing you to exit as they might want to take over the business themselves, or, they may have other potential franchisees available to take it over.

What happens if you terminate a franchise agreement?

In the event that you have terminated your franchise agreement for a franchisor’s breach, you may then start court proceedings against the franchisor and seek damages caused by the breach. For example, you might seek to recover the money you have lost by investing in the franchise and future profits you might have otherwise made but for the franchisor’s breach.

How long does a franchisor have to remedy a breach of franchise agreement?

Allows a reasonable period (up to 30 days) to remedy the breach. Tells the franchisee that the agreement will be terminated if the breach is not remedied. If the breach is remedied in accordance with the notice then the franchisor cannot terminate the agreement.

How to tell franchisor about a proposed transfer?

1) give the franchisor written notice of your proposed transfer and provide all the necessary information for them to make an informed decision about it. 2) The necessary information will include you telling the franchisor: When the proposed transfer/sale is scheduled to take place; Who the proposed transferee is;

When a franchisee is in breach of one or more obligations under the franchise agreement, must the franchisor send?

When a franchisee is in breach of one or more obligations under the franchise agreement, the franchisor must send the franchisee a written notice under the Code that: Explains the nature of the breach under the franchise agreement. Tells the franchisee what it needs to do to remedy the breach. Allows a reasonable period (up to 30 days) ...

When is a franchisor obliged to follow the process above?

A franchisor is not obliged to follow the process above when there are special circumstances, such as: When the franchisee does not hold the relevant licence to operate the franchise. When the franchisee becomes insolvent. When the franchisee abandons the business. When the franchisee is convicted of a serious offence.

What to do when you have a franchisor's consent?

When you have the franchisor’s consent (and the landlord’s if required) it is then recommended you engage a lawyer to help you with preparing the paperwork. You will need to enter into a Contract for the Sale of Business with the proposed purchaser and you may also have a Deed of Termination with the franchisor. A solicitor experienced in franchise law is best placed to negotiate the terms of those documents on your behalf.

How to prepare for exit?

A better way to prepare for exit is to create a personal financial plan that includes a comprehensive succession plan. Succession planning is becoming prominent in franchising as some 80 million baby boomers approach retirement, the impact of which is felt by franchisors and franchisees.

Why do franchisees leave?

Many reasons for exiting include a better work/life balance, opportunities for “Act II” post retirement, and growing valuations which make an exit more attractive. Developing a plan three or more years before exiting is wise. Many franchisees wrongly assume this is a simple process. However, a multi-dimensional plan is required and can be complex to develop and implement.

What is the franchisee effect?

Franchisee effect: Includes the ability to negotiate an agreement that aligns your business goals with personal financial goals. Good financial planning analyzes variables such as number of units owned, valuation per unit, transfer taxation and sale.

Why don't businesses survive to the second generation?

Among the primary causes is failure to create and execute a management succession plan. Other factors include inadequate estate and liquidity planning.

What is the key selling factor?

A key sale structuring factor is taxation . There are two sales categories from a taxation perspective: assets and stock.

How effective is the Five Buckets approach?

Doing the proper planning towards meeting your life’s financial goals can create confidence and direction and lower stress. The “Five Buckets” approach can be highly effective. By creating a plan and refining it, a complex situation can be simplified and put you on the path to achieve your goals.

What is effective succession planning?

Effective succession planning is a custom-designed approach that maps how the owner intends to transfer his business. These could be to family members, another franchise owner, a third-party acquirer or private equity group or, the franchisor.