Navigating the franchise resale process with industry experts

BY KEITH GERSON, CFE AND ALESHA YANKIE, MBA

Franchise resales programs are a critical component of a franchisor’s toolkit, providing franchisees with a graceful exit strategy while offering potential buyers a turnkey business opportunity. However, building an effective resale program requires careful planning, dedicated resources, and a deep understanding of the intricacies involved in reselling a business. In this article, we’ll explore the insights shared by industry experts, Alesha Yankie, VP of Resales for Neighborly and Keith Gerson, President of Franchise Operations for FranConnect, on how to construct a successful franchise resale program.

Starting with a Proactive Approach
Begin with the end in mind.Adopting a proactive stance in discussions regarding franchise resales will be a critical step in your program’s success. This proactive strategy could encompass offering webinars and training on Succession Planning, ensuring that franchise owners comprehend the resale process, even if they don’t intend to sell for several years. Keeping the end in mind allows them to maximize their return when the time comes to sell. It’s also vital in cases where a franchise location is struggling. Identifying underperforming businesses early and discussing potential solutions, including selling the business, ensures there’s sufficient time to navigate the resale process.

The Role of Dedicated Resale Developers
Navigating the process of reselling franchises presents a unique challenge for franchisors, often stemming from the absence of a well-defined strategy and a dedicated resale franchise developer within the organization. This gap leads to common scenarios where some franchisors opt to outsource the resale process, referring their franchise owners to external business brokers or assign it to internal team members who also handle new sales. However, this dual role can raise questions about the level of expertise available for handling resales, and it potentially diminishes the support provided to the franchisees. Therefore, having a dedicated professional with expertise in the process’s intricacies is critical, as demonstrated by Neighborly, which found success in having a specialized team solely focused on resales.

Impact on the Franchise System
A well-structured resale program can have a profoundly positive impact on the entire franchise system. It instills confidence in potential buyers, showcasing the franchisor’s commitment to support owners throughout their journey. Additionally, it aids in reducing terminations and bad debt, leading to a more stable and prosperous franchise system. Yankie emphasizes that a successful resale program contributes significantly to the overall health of the franchise system, offering an attractive exit strategy for retiring franchisees and bolstering the confidence of potential buyers, thus driving new sales.

Proactive Approach to Resale Discussions
To build a successful resale program, franchisors should adopt a proactive approach by identifying franchisees who may be considering resale or retirement early on. This allows for ample time to provide them with necessary support and resources, leading to a smoother transition and higher chances of a successful resale. Establishing a close partnership with the operation team is crucial. They are often the first to notice warning signs, such as missed royalties or a declining business. By leveraging these insights, franchisors can initiate discussions about the possibility of resale. This early intervention can make a significant difference in the success of the process.

Are Existing Franchise Owners the Best Buyers?
Enabling existing franchisees to expand through resales can be a strategic move, fostering growth and stability within the system. However, careful consideration of the company’s stance on this practice is crucial. Establishing clear expansion criteria can ensure that the existing franchisee is in a position to successfully expand without jeopardizing their current operation by taking on too much.

Handling Unrealistic Expectations
Addressing the seller’s expectation is a delicate but crucial aspect of the resale process. Franchisees may have invested substantial time and resources into their businesses, leading to high expectations. Engaging a reputable business appraisal company can help educate franchisees about how businesses are valued. It’s essential to guide them through the realization that if their business is struggling, they may not be able to recoup the total investment made into the business, but it’s still a valuable opportunity to recoup some of their investment. Yankie stresses the importance of partnering with a business appraisal company to ensure fair and realistic valuations. This not only provides clarity for the franchise owners but also sets the stage for a smoother resale process.

Conclusion
Building a successful franchise resale program demands careful planning, dedicated resources, and a proactive approach. By incorporating the insights shared by industry experts, franchisors can establish a robust framework for handling resales effectively. This not only benefits franchisees seeking to exit but also contributes to the overall stability and growth of the franchise system. With the right strategies in place, franchisors can navigate the resale process with confidence and success, ensuring the longevity and prosperity of their franchise network.

About the Authors
Alesha Yankie is Vice President of Franchise Resales for Neighborly®. She leads a team of resale franchise developers that are specialized in the selling/buying process of Neighborly Franchise Locations across 17 North American Brands. Their resale department supports franchise owners in preparing their business for sale and to help coach them through the selling process.

Keith Gerson, CFE is President of Franchise Operations for FranConnect. He’s been an executive in franchising for nearly 50 years and is an expert in franchise sales, development, franchise relations and operations and is renowned for his thought-leadership which he generously shares with franchisors ranging from emerging brands through enterprise brands worldwide.