3 Vital Ways a Restaurant Franchise Resales Strategy Keeps Units Open

In the ever-evolving landscape of the restaurant industry, franchisors face a myriad of challenges. From maintaining brand consistency to ensuring financial stability, the journey is filled with potential pitfalls. However, one strategy that can significantly bolster a franchisor's success is a robust franchise resales program. At We Sell Restaurants, we've delved deep into the intricacies of this strategy, and here's what we've discovered: a well-executed resales strategy can be the linchpin for sustained growth and success. Let's explore three pivotal ways this strategy can keep your franchise restaurant units open and thriving.

1. Net Restaurant Growth: The Power of Continuity

The success of a franchise system isn't just measured by the number of new units opened but also by the number of units that remain operational over time. Net restaurant growth is a critical metric, and here's how a resales strategy plays a pivotal role:

• Minimizing Unit Closures: When franchisees wish to exit, a resales strategy ensures that the unit doesn't close but instead transitions to a new, qualified owner. This continuity prevents a dip in the net growth figures.
• Maintaining Brand Presence: Every unit that remains open contributes to the brand's visibility and market presence. This continuous presence reinforces brand trust and loyalty among customers.

2. Aiding Struggling Franchisees: A Win-Win Solution

Every franchise system will have units that, for various reasons, underperform or face challenges. A resales strategy can be a lifeline for these struggling franchisees:

• Financial Relief: By facilitating a timely resale, you provide an exit route for any franchisees facing financial hardships, allowing them to recoup some of their investments.
• Brand Reputation: Assisting struggling franchisees through a structured resale process portrays the brand as supportive and understanding. This boosts morale among existing franchisees and attracts potential franchisees.
• Expert Guidance: We Sell Restaurants offers comprehensive support to ensure that struggling units are presented in the best light, attracting buyers who see the potential for turnaround. These new buyers takeover the store and can bring new energy, ideas, and passion to the business.

3. Exit Strategies as a Selling Tool: Attracting the Right Franchisees

A clear exit strategy isn't just about ensuring smooth transitions; it's also a powerful tool to attract new franchisees:

• Boosting Confidence: Prospective franchisees are more likely to invest when they know there's a structured exit plan in place. It reduces perceived risks and showcases the brand's forward-thinking approach.
• Showcasing Success Stories: Every successful resale can be highlighted as a success story, demonstrating the brand's commitment to its franchisees from start to finish.

We Sell Restaurants Takes Away the Pain of Restaurant Franchise Resales

Franchisors might wonder, "Why can't I manage resales internally?" Not only does an expert, third-party resource make for a smoother transition, a formalized franchise resales program also removes the conflict of interest, legal risks, and pricing mistakes that arise when letting your internal development team handle the resale.

➡Read also: 5 Reasons a Franchise Resale Program Should Not Be Handled by Development

There is an inherent conflict of interest when franchises are handled internally. Questions arise about who the brand is loyal to in the transaction. Is it to the new franchisee? Does it belong to the existing franchisee who already has a franchise agreement with you? You could consult your legal team to develop a plan for minimizing questions of loyalty, but the inherent conflict of interest remains. For a successful transaction where both parties are happy at the closing table, brands should look to a formalized franchise resale program.

More critical than that, an internal franchise resales program may not be legal. Licensing laws in the U.S. vary state-to-state. There are twelve states, for instance, where only licensed real estate agents are permitted to perform business brokerage. These legal requirements should not be overlooked, and, if they are, you put your development team at risk of committing a misdemeanor in some states, or a felony in others.

Additionally, franchise resale pricing can put unnecessary stress on your development team to arrive at the right listing value. Restaurant valuation is a math problem with right and wrong answer, and if the pricing is incorrect, you risk the restaurant’s ability to sell at all. 

While it's possible to have an internal franchise resales program, the expertise and resources required are substantial. Here's where We Sell Restaurants offers unparalleled value:

• Industry Expertise: With decades of experience, we understand the nuances of the restaurant franchise resales market. We can effectively price units, market them to the right audience, and ensure a smooth transition.
• End-to-End Support: From initial consultations to finalizing sales, we offer comprehensive support, ensuring that both franchisors and franchisees feel confident and supported throughout the process.
• Eliminate Conflict of Interest: As a third-party resource, We Sell Restaurants performs the resale transaction without any inherent conflict of interest.
• Legal Compliance: Our Certified Restaurant Brokers are licensed real estate agents in their respective markets to comply with varying licensure laws. Brands can protect their development team this way through a formalized franchise resales program with We Sell Restaurants.
• Pricing: With our understanding of benchmark pricing, adjustments in line with SBA lending criteria, and deep financial acumen, we eliminate the guesswork in restaurant franchise resales valuations. An accurate restaurant evaluation is critical to obtaining lending and attracting buyers.

In the competitive world of restaurant franchising, it's not enough to just open new units; it's equally crucial to ensure that existing units remain operational and successful. By focusing on net restaurant growth, supporting struggling franchisees, and leveraging exit strategies as a selling tool, franchisors can ensure sustained success. Restaurants brands trust We Sell Restaurants when they need to build a successful franchise resales strategy. Contact Us Today to learn how you can support your brand and its franchisees through a formalized franchise resales program.

Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE, is the co-founder of We Sell Restaurants, a brand that has carved an unparalleled niche in the industry as the nation's leading and only business broker franchise focused on restaurants. Under Robin’s leadership, We Sell Restaurants has grown to 45 states where it dominates the restaurant for sale marketplace, including franchise resales, delivering on the founder’s vision to Sell More Restaurants Than Anyone Else. We Sell Restaurants was named one of the most influential suppliers and vendors in the country by Nation’s Restaurant News and has earned a position on INC 5000’s list of fastest growing privately held companies. Franchisees of We Sell Restaurants surveyed by Franchise Business Review placed it 25th in the nation in franchisee satisfaction.

Robin is the Chair of the Women’s Franchise Committee of IFA and is a member of the IFA Board of Directors. She is also an MBA and Certified Franchise Executive (CFE) and has her CBI (Certified Business Intermediary) designation from the International Business Brokers Association. She co-authored Appetite for Acquisition, a small business book award winner in 2012 and contributes frequently to industry press appearing in Forbes, QSR, Modern Restaurant Management, Franchise Update, and others. She has appeared on The TODAY Show as a restaurant expert and Entrepreneur Magazine has named her to their list of the “Top Influential Women in Franchising.”