Who’s in charge and what’s at stake?
One of the biggest opportunities for franchisors to improve their system is happening right under their noses. Every system will eventually have franchisees, for a variety of different reasons, looking to sell. It could be positive, with the franchisee looking to monetize the most significant business asset they own. Or it could be negative, with owners who just aren’t good at the franchisor’s system. Either way, no one ever owns a business forever and at some point it is better for all involved if they leave.
But many franchisors, especially emerging brands, are shocked and even disappointed that franchisees want to sell and move on. Instead of coaching them and looking at the opportunity that a fresh new owner will bring, the franchisor lets the franchisee control the process and puts roadblocks in their way instead of accelerant. The biggest missed opportunity here is that typically no one is in charge of resales. Operations says that it is franchise development’s issue and franchise development will say resales don’t grow the system and they don’t want to lose good leads to a resale. Many franchisors will not even compensate their sales team for resales which is an enormous missed opportunity. Put someone on your team in charge, create a great resale system and replace your tired and cranky franchisees with fresh, well financed and energized franchisees.
In my career, as both a franchise lawyer and back when I ran a franchise development team, I have consistently seen that a new unit owner will almost always outperform the system as a whole. A 15% gain is a normal expected outcome for a new owner who will embrace the current system, will recapitalize the business and be on a mission to grow revenue and profits. There are not many marketing or operations strategies that can lift a unit by 15%, let alone one that cost next to nothing.
You should be building your business with an exit strategy in mind and so are your franchisees. Don’t run from resales, embrace them as a key 2020 strategy to improve your brand.
– Tom Spadea, Franchise Attorney and founding partner of Spadea Lignana, LLC
Tom Spadea is a franchise attorney and founding partner of Spadea Lignana, one of the nation’s premier franchise law firms representing over 250 brands worldwide from emerging concepts to elite brands that are household names. Tom is a Certified Franchise Executive, speaker, author and key advisor to many high level executives and entrepreneurs in franchising. Visit www.spadealaw.com or reach out to Tom directly at tspadea@spadealaw.com.