If you are are the franchisor of franchise restaurant business, keep reading to learn why establishing a strong franchise resale program is key to the success of your brand.
Franchisees sell their businesses for a variety of reasons. As the franchisor, you don't want to learn at the last minute about a candidate who may or may not fit your model or be qualified to proceed. This can disappoint two stakeholders at the same time; the would-be franchisee and the existing franchisee, setting up a difficult relationship for the future. It's important to support restaurant franchisees in their path to sell and provide a clear exit strategy. Some franchise resales occur intentionally while others occur after unforeseeable circumstance force the decision. There are a variety of reasons your restaurant franchisees will need a sturdy exit strategy in the form of a cohesive resale program.
Restaurant Franchise Resales Programs Offer a Clear Exit Strategy
A strong franchise resale program not only establishes a smooth process for new franchisees to buy units, but it also provides a pathway outgoing franchisees who need an exit strategy. In any business, establishing your exit strategy from day one is key to the success of the business owner and the franchisor. Firstly, a restaurant franchise resale program gives franchisees peace of mind that they can exit the business smoothly when the time comes to retire or move one. Secondly, a restaurant franchise resale program can provide the franchisor peace of mind that they business is transferrable, reducing the number of units that close due to poor management, unforeseen circumstances, etc. Lastly, it provide peace of mind to the operator that this is a valuable asset that has residual value when they choose to retire or move to new opportunities and therefore reinforces the efforts of your development team. As the franchisor, you should develop a strategic and long range restaurant franchise resale program like the ones described in this article. There are several reasons they may need to transfer the franchise unit to someone new including:
- Burn out
- Itch for a new career
- Ready to retire
- Unpredictable circumstances—death, divorce, drugs, etc.
As the franchisor, ask yourself “Does my brand have a restaurant franchise resale program that grants franchisees the security of an exit strategy when they need to sell?” If your answer is anything but "yes!", then consider partnering with a trusted franchise resale expert with a specialty in restaurant brokerage.
Scale Your Brand Effectively with a Franchise Restaurant Resale Program
Presenting an exit strategy from your brand is one more incentive for a franchisee to invest. Those candidates who are motivated to invest, fulfill the term of the franchise agreement, and then cash out on the business want to see a succession path and way to recoup their initial costs in order to move to the next thing. This helps your brand grow in a couple ways. For one, it attracts franchise candidates to invest. Secondly, a franchise resale program fuels a cycle of fresh candidates who can take over older franchise units, potentially introducing better sales, new ideas, and greater drive for success.
In 2021, data from Franchise Update Media reported that 73% of the franchise brands exceeding their sales of new units already have a formalized franchise resale program. The statistic is possible because your franchise development team can focus on new sales while your trusted franchise resale partner can transfer units. This is why a franchise restaurant resale program is an important part of your development strategy as a franchisor, and why it is an effective way to scale growth.
A Franchise Restaurant Resale Program Creates Opportunities
The cost to buy and build out a brand-new franchise restaurant can be costly and time-consuming. On top of that, consider the initial franchise fees, royalties, and other startup costs that will apply. Buying a franchise restaurant comes with a hefty price tag. When you, the franchisor, establish a franchise resale program for your restaurant brand, you create a pathway for one franchisee to transfer the business to a new franchisee to acquire at a lower overall investment. This is a significant step to expand the diversity and inclusion of your franchise restaurant to a wider group of qualified candidates. This is also another way to introduce fresh motivation and new ideas to your brand.
How to Establish a Strong Franchise Resale Program for Your Restaurant Brand
When the franchisor is ready to set their franchisees up for success by providing a clear resale path, there are a few things to keep in mind. Notably, while it may be tempting to keep your resale program up to your internal development team, this strategy may cause more problems than it solves since it introduces a conflict of interest. The restaurant franchise resale buyer is less likely to trust the pricing if it originated internally. That’s just one reason why your franchise resales should not be handled by development. Instead, seek out a reputable third-party, like We Sell Restaurants, with the know-how to successfully price, market, and sell the franchise unit to a new owner.
Watch your Franchisees Succeed with a Restaurant Franchise Resales Program
At the end of the day, a strong franchise resale program facilitated by an expert sets your franchisees up for success. On one hand it provides an exit strategy, and on the other it allows new franchisees to invest and create their own success through your brand.
If you are looking for a third-party to assist with the resale of your restaurant franchise units, contact We Sell Restaurants about establishing a franchise resale program with our Certified Restaurant Brokers. We work with restaurant franchisees every day to assist them in successfully selling their franchise restaurant unit. National brands like Firehouse Subs, Marco’s Pizza, and Rita’s Italian Ice are just a few of the franchisors who trust We Sell Restaurants to handle provide that exit strategy for restaurant franchisees, no matter their reason for selling. Check out the full Guide to Franchise Resales.
Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.