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Franchise Exit Strategies: Best Practices for Buying or Selling an Existing Franchise
Be sure to subscribe and tune into our quarterly luncheon discussions through our podcast on iTunes.
During this luncheon, we cover “Franchise Exit Strategies: Best Practices for Buying or Selling an Existing Franchise.” We welcome panelists, Eric Lavinder, Jena Henderson, Jim Provo, and moderator, Tom Spadea, to cover the unique challenges associated with exiting or inbounding into the franchise system.
Meet the Panel
Eric Lavinder
Executive Vice President of The Simple Greek (a Marcus Lemonis Company). Connect with Eric.
Jena Henderson
Vice-President, Brand Services Saladworks. Connect with Jena.
Jim Provo
Franchisee, My Salon Suites, SBA Economic Development Specialist. Connect with Jim.
Main Points
Let’s highlight a few key discussions throughout this event:
[2:39-4:54] Why do people sell and transition in the first place?
Jena points out, “Our lives are constantly changing.” The franchise arena may have been suitable at one point, but eventually, life gets in the way. Eric and Jim agree—each emphasize the importance of maintaining a clear plan of action when your exit time is near.
It may be that your operations aren’t successful, or you are ready to retire. Regardless, set clear expectations and understand how to execute your plan. If your vision and communication are clear, your exit will be graceful.
[4:55-8:52] Let’s talk evaluations.
There are many methods of evaluations out there. Jim mentions a common financial method which can be determined by establishing the proper multiple of a seller’s discretionary earnings.
However you chose to understand the value, an evaluation is necessary. Establishing this number will help a seller assess the worth of a business and a buyer to determine if the business is a worthy investment.
There are a lot of factors that drive a business owner to sell — sometimes the challenge for a seller can be, “Why should I sell?” Do the research! There are plenty of digital resources that can help you.
[8:53-12:10] How do franchisors deal with franchisee’s unrealistic expectations?
One word: honesty. Eric points out how simple a conversation based upon revenue can be if a franchisee isn’t producing sales. If your business is failing, “You have two options: get back in your store and fix your sales! If your business isn’t making money, get out and sell.”
Jena adds, as a franchisor, it’s your responsibility to keep a close eye on a business where an exit may be in the works. Oftentimes a franchisee will sit on a business that is bleeding because they are not ready to sell their location for less than what they put into it. The reality is, a franchisee should not expect to receive a profit when selling. The franchisor should monitor these situations and step in to have that difficult conversation if necessary.
[12:11-29:59] What do you think surprises buyers or sellers about the sales process?
All panelists agree that the amount of due diligence that is necessary between a buyer and seller is overwhelming for some to imagine. Each party should know the franchise requirements, be educated and understand the FDD. Eric reminds us, the franchise system shouldn’t be considered an entrepreneur venture. “You are buying into a system” that enforces spending to be allocated in order to continuously reinvent th...
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By Spadea LignanaBe sure to subscribe and tune into our quarterly luncheon discussions through our podcast on iTunes.
During this luncheon, we cover “Franchise Exit Strategies: Best Practices for Buying or Selling an Existing Franchise.” We welcome panelists, Eric Lavinder, Jena Henderson, Jim Provo, and moderator, Tom Spadea, to cover the unique challenges associated with exiting or inbounding into the franchise system.
Meet the Panel
Eric Lavinder
Executive Vice President of The Simple Greek (a Marcus Lemonis Company). Connect with Eric.
Jena Henderson
Vice-President, Brand Services Saladworks. Connect with Jena.
Jim Provo
Franchisee, My Salon Suites, SBA Economic Development Specialist. Connect with Jim.
Main Points
Let’s highlight a few key discussions throughout this event:
[2:39-4:54] Why do people sell and transition in the first place?
Jena points out, “Our lives are constantly changing.” The franchise arena may have been suitable at one point, but eventually, life gets in the way. Eric and Jim agree—each emphasize the importance of maintaining a clear plan of action when your exit time is near.
It may be that your operations aren’t successful, or you are ready to retire. Regardless, set clear expectations and understand how to execute your plan. If your vision and communication are clear, your exit will be graceful.
[4:55-8:52] Let’s talk evaluations.
There are many methods of evaluations out there. Jim mentions a common financial method which can be determined by establishing the proper multiple of a seller’s discretionary earnings.
However you chose to understand the value, an evaluation is necessary. Establishing this number will help a seller assess the worth of a business and a buyer to determine if the business is a worthy investment.
There are a lot of factors that drive a business owner to sell — sometimes the challenge for a seller can be, “Why should I sell?” Do the research! There are plenty of digital resources that can help you.
[8:53-12:10] How do franchisors deal with franchisee’s unrealistic expectations?
One word: honesty. Eric points out how simple a conversation based upon revenue can be if a franchisee isn’t producing sales. If your business is failing, “You have two options: get back in your store and fix your sales! If your business isn’t making money, get out and sell.”
Jena adds, as a franchisor, it’s your responsibility to keep a close eye on a business where an exit may be in the works. Oftentimes a franchisee will sit on a business that is bleeding because they are not ready to sell their location for less than what they put into it. The reality is, a franchisee should not expect to receive a profit when selling. The franchisor should monitor these situations and step in to have that difficult conversation if necessary.
[12:11-29:59] What do you think surprises buyers or sellers about the sales process?
All panelists agree that the amount of due diligence that is necessary between a buyer and seller is overwhelming for some to imagine. Each party should know the franchise requirements, be educated and understand the FDD. Eric reminds us, the franchise system shouldn’t be considered an entrepreneur venture. “You are buying into a system” that enforces spending to be allocated in order to continuously reinvent th...