Advice for Buying a Restaurant and Selling a Restaurant

5 Compelling Reasons Franchise Resales Should be a Critical Strategy for Most Brands - 5 Part Series

Posted by Robin Gagnon on Feb 25, 2020 9:19:24 AM

Ask any Franchise Development leader and they will acknowledge that franchise resales happen – a LOT.  Ask if they have a definitive program in place to handle those franchise resales and the response may be, “not so much.” 

Here are five compelling reasons this Restaurant Broker sets up programs for franchisors nationwide.

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Reason 1:

Failure to Plan is not a strategy.  It is rare to find a restaurant franchise group that has a clear vision in writing for franchise resales.  A clear vision means everyone understands the position on resales and it has been properly communicated and shared by everyone from Development to the C-Suite.  Without a clear picture and plan, we see franchise resales be swallowed up or placed to the side of the seemingly more important task of new franchise development.

The problem with this approach is that resales average 8% to 10% of your brand each year and it is difficult to outgrow the impact of these numbers.  If you don’t plan to handle 10% of your stores transferring, you may need to be prepared for those same stores to go dark.  That’s why it’s imperative that you develop a strong resale program.

Reason 2:

No Trigger Identification.  With a definitive program in place, it’s easy for franchisors, like the franchise restaurant groups we work with to identify the “triggers” for resales within the system.  These can include items like expirations, renewals, legal issues, operational issues, or financial issues.  A well crafted program, anticipates transfers through early warning systems set up against these triggers to anticipate store turnovers.

By monitoring these triggers, you can bring in resources to transfer those stores, rather than see them fail.  Quick implementation of a franchise resale strategy can ensure the stores turn over to new owners rather than losing the location.  

Reason 3:

Things change.  A plan for franchise resales includes discussions around succession planning with your Operations team and franchisees at least annually.  They should be tracking the plan for each unit.  Even with a plan in place, you may still be caught off guard by the “Three D’s” of resales – death, divorce and drugs.

With a culture that encourages discussion around the next generation of store ownership however, and partners who know how to make the stores move into the hands of those outside the family where necessary, each store has the potential to be saved.

We see many franchise restaurant operators surprised when the next generation of leadership simply moves on to another field.  That’s why discussions on succession planning are critical.

Reason 4:

It’s a different client.  While most marketing teams have a strong development strategy for attracting new buyers to the brand that is well funded and carefully reviewed, the story is often a bit more muddled for franchise resales.

Unless your marketing team has a strong plan for attracting those to “second generation” opportunities or franchise resales, you have missed the mark and it’s a compelling reason for bringing in an expert to help you get this on track.  The customer for a franchise resales is not the same as a new location.  They will have a higher aversion to risk and a different need for lending.  Pushing them through the same lead funnel as new franchise sales or attempting to attract them with the same marketing messages sets you up for failure.

Reason 5:

Intellectual Property Control.  Your trademark and the use of the brand in marketing franchise resale locations by third party brokers or for sale by owner messaging can attract the wrong attention from new franchise candidates.

Have you considered how and when your logo can be used on a franchise resale versus a new sale situation?  A well planned program will make sure you do not lose control of that valuable intellectual property and ensure that any ads for franchise resales conform to your requirements for the brand.

These are just five of the top twenty compelling reasons you should have a well thought out franchise resale program whether you are a 50- unit franchise restaurant brand or a 100-unit service concept.

As a Restaurant Broker, I set up programs for franchisors across the nation to confirm that these compelling reasons result in a strategy that retains and attracts the best clients for franchise resales.  For a look at some of our franchise restaurant resale listings, click this link.

We'll continue with this five-part series on compelling reasons why franchisors need a resale program in the coming posts.

Topics: Selling a Restaurant, Franchise