Taking on a franchise is a long term commitment that once entered into you typically can’t exit early unless you sell the business. The agreements you enter into also contain controls regarding what you do – once the franchise has come to an end – that can prevent you from operating competing businesses, continuing to deal with customers, as well as other activities that might adversely impact the goodwill of the Franchisor.
This means that for those who (i) want to exit early; or (ii) continue operating their business independently and outside of the franchise once it comes to an end, it will be vital to do a deal to leave.
This article therefore focuses on our top 5 tips on how to achieve a smooth exit.
Tip 1 – Timing – Leave the party at its peak
Timing in life is everything – considering your exit plan is key – it’s always best to do so when you are on your game – business is going well – you have good engagement with the Franchisor
Tip 2 – Ask and Ye Shall Be Forgiven
Approach the Franchisor. If you are on good terms then brokering the conversation about an early exit or potentially flipping the signs might not result in the acrimony that you envisage. Have an open dialogue with them, expressing your intentions and getting a measure of where they stand on this and their position
Tip 3 – Know your Worth
It’s key that you know what your business is worth – its valuation and what you might be liable to pay to enable exit or retention of the customer base and the right to operate a competing business
Tip 4 – Use Leverage
Now I’m not about to advocate going fully legal but it is worth knowing whether there are any levers that you could apply to improve your negotiating position. In particular were you misled in taking the franchise, has the Franchisor lapsed in providing you with adequate support, is the Franchisor making wholesale changes to the way the network operates that are leaving you financially disadvantaged? Note; these shouldn’t be excuses for your own poor performance but genuine reasons why the franchise is no longer for you
Tip 5 – Source Buyers
Your franchise is an asset that you can sell to realise your investment . Where you wish to exit early it is always open to you to sell your business to a third party. Franchise brokers can market your business for sale and you can exit smoothly and profitably that way instead
In short, exiting a franchise early need not be a battle if approached commercially and with a mutually beneficial outcome in mind.
