Exit Strategies: Top Five Steps to Guide You Through the Process

Whether it’s time for retirement or you are ready to start a whole new chapter, it’s important to buy into a system that is committed to helping you through the transition process.

By Shakon “Shak” Turner, CFE

As a franchisee, when you first buy into a franchise, you’re often filled with excitement about your new venture and the opportunity to build wealth for you and your family. After all, planning for the future is one of the primary reasons prospective owners buy into a franchised business in the first place. That said, things can change. Whether it’s time for retirement after years of running your business or you are ready to start a whole new chapter in your life, it’s important to buy into a system that is committed to helping you through the transition process. 

Top franchises, including Valpak, should have in-depth resale assistance programs in place to guide its dedicated franchisees through this process. The decision to transition can be a challenging one. So, whether you’re an emerging or established brand looking to establish your own exit strategy program or a franchisee researching tips on how to leave your franchise for whatever you have planned next, be sure to review the following steps.

Be prepared to answer questions 

“Why are you selling your franchise?” This is one of the first and most common questions you’ll receive from a potential buyer. There are many reasons why people are ready to sell their business: retirement, a change in life has happened or you are just ready to move onto the next business. Regardless of the reason, you’ll want to have your story put together and ready to share with potential buyers. It may also be tempting to let your personal feelings get in the way if you are no longer happy within the franchise system. Remember, you are selling your business and just as the product or service you sell through your business, how you present that will determine the value and overall perception buyers will have of your business.  

Determining the price and finding a buyer

At Valpak, one of the most often questions asked is: “What is the value of my business?” Many franchise organizations will not offer a business valuation tool, so it is incumbent upon you to determine a fair market value for your franchise. When you establish a sale price for your business, we recommend you take your time and determine the “right price.” Setting too high of a price may drive away qualified prospects. You may also opt to seek the services of an independent business appraiser to help you understand how to value your business. In addition, there are numerous sites that offer business valuation services with differing valuation methodologies to choose from. The two commonly used business valuation methods are depreciation
and amortization. 

How to effectively promote your business for sale

Once you have decided to sell your business, you need to make a couple of decisions. The first one is if you want to inform your employees. The bottom line is that there are risks and opportunities associated with making this decision, and I advise all franchisees to consider a couple of things. While initially franchisees are wary of notifying employees for fear of losing them, the reality is each employee is usually much more valuable to the person purchasing the business than they are to you. Listing your business for sale on your protected franchise website can also help drive potential prospects in the internal franchise network. Franchisees can also retain a business broker to help sell the business. Note: Often a business broker will charge at least 10 percent of the selling price.

You Found a Buyer! Now What?

All of your hard work paid off — you found a potential buyer. So, what’s next It’s imperative to provide a qualified potential buyer with the information necessary for its accountant and lawyer to help in their decision making process. Make sure your financial ducks are in a row, as the prospect will be reviewing your financials and looking for proof that the business is worth the asking price. While every franchisor reviews prospects differently, your potential buyer will need to be reviewed like you initially were and any other new potential franchisee. The approval process may include completing a franchise application, meeting requirements for liquidity, net worth, credit and background checks and much more. 

Sealing the deal

Often times, a franchisor will provide you with a boilerplate purchase agreement, which is helpful in illustrating certain provisions in the new contract and can save the seller, buyer and franchisor serious time and money. 

Once approval is granted, the process continues with the dates and timing that were likely already discussed. With a formal process in place, transitioning a franchise territory or location doesn’t have to be an unpleasant experience for either the franchisee or franchisor. It can be a “win-win” for everyone involved. 

Shakon “Shak” Turner, CFE, is the Franchise Sales Director of Valpak.