What is a Franchise Exit Strategy? (and Why You Should Have One)
Sometimes when entrepreneurs start on the path to franchise ownership, they focus too much on profit-building and not the big picture. The big picture, in this case, is having a franchise exit strategy. Yes! Before you can consider the beginning of your career in franchising, you must consider the end. A franchise exit strategy enables a business owner to minimize or liquidate their interest in their franchise location(s) while still making a significant profit.
Of course, this only works if the company remains profitable. Franchisees must have a strategy in place for selling their company, whether they decide to retire or move on to other ventures. Even if the sale is unplanned, a formal exit strategy will allow you to leverage your franchise location’s true value.
Let’s dive in further.
What is an Exit Strategy?
As we touched on in the intro, a franchise exit strategy allows franchise owners to leverage their business’ true value. It is defined as a contingency plan used by an investor, trader, venture capitalist, or business owner to liquidate a stake in a financial asset or sell tangible business assets after defined conditions are met or exceeded. When an investment or business plan achieves its benefit target, you may implement an exit strategy.
An exit strategy can be used in several situations, including:
- To get out of a losing investment or close a business
- Transfer ownership in the event of the owner’s death or retirement
- The franchise owner is retiring and needs to cash out
- A drastic shift in marketing conditions due to legal reasons (ex: estate planning)
As a business owner, one of your primary concerns is reducing loss and making your franchise profitable, and having a franchise exit strategy (or “exit plan”) can help. Exit strategies and other money management methods can help traders and investors boost their trading by suppressing emotion and lowering risk. An investor should set a point at which they will sell for a loss and a matter at which they will sell for a profit before entering a trade.
Why Should You Consider Having a Franchise Exit Plan?
Not every entrepreneur buys a franchise to run it forever. Some want franchise ownership to be a chapter in their portfolio and use it as a stepping stone to other business ventures. For others, it is a way to build funds for their retirement. No matter what your reason, a franchise exit plan is necessary. It ensures the smooth transition of ownership and enables you to be the captain of your own destiny, whether that’s staying on as a consultant or an active or silent partner.
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Whatever alternative you choose, the most important thing is to communicate with your franchisor about how the exit process functions, what franchisor permits are needed to sell, and any other criteria the franchisor might have, such as equipment upgrades.
The good news is that you have many exit opportunities. You can successfully navigate your franchise experience from start to finish by preparing ahead of time and working with your franchisor. If you need help developing your franchise exit strategy, our team at Hundred Acre Consulting can help. We can help you find the perfect franchise opportunity and guide you throughout your storied franchise career.
Are you interested in working with us or learning more about our services? Contact us today, and let’s chat!
