What are you going to do with your business when you decide to move on?

I have not found a cure to stop people from dying, so your life will end at some point in the future.  So… most people I talk to have no idea what they are going to do with their business when they decide to call it a day.  Now you might call it a day for various different reasons, you might want to retire, you might want to do something a bit different, on a slightly dour note you might come down with a serious illness or even worse it might be your time to go.

I suppose this question does also depend on who is reliant on the business.  If  you have a self-employed job ie: you work on your own and only get paid when you work, then apart from letting your customers down I suppose you can just shut the doors and call it a day, because you’re the only one reliant on the business.  Now let’s just think a bit bigger, you have a business: i.e. you earn money even if you’re not there everyday but it’s still your input, what then? Well the good news is that you have a saleable asset, so if you want to you could sell your business or pass it on to your children.

When you start getting to this point you do need to think about your exit plan, let’s be honest you don’t want to be working forever! Just imagine spending a few more days on the golf course, or with your other half shopping, ok… you might want to work more lol.  Did you read my blog on “why systems are so important” if not I suggest you read it.  Systemising your business will give you the freedom to go and do whatever you wish with your life, it also secures the jobs and livelihoods of your staff.

Some of you are still not even going to consider your exit at the moment, however, I highly advise that this is something on your “to do over Christmas” list.  If you know you want to be out of the day to day side of the business in 10 years, then you need to plan for it.

If you are serious about selling the business then you will need 2-3 years to prepare for the sale of the business, if you can.  This is where you start increasing your profit figures on paper and stop paying for the husband’s or wife’s car, the kid’s private schooling and that boat in the south of France, all this now has to go back into the business to create a more saleable asset.  I’m not saying that not doing this is going to stop you from selling, but I am saying that you will not receive the price you want to achieve without increasing the profits on paper.

It’s simple, purchasers want to buy businesses cheap, and sellers want the best price for their business, so make it the best price and the buyer can’t argue with you.  Purchasers really don’t care about your lifestyle and the big house, and nice cars, they will only look at what’s written down on paper.

Please look at your exit plan and have an idea of what you are going to do with your business, don’t just really on hope.

Michael

Franchisors and resales – the need for strategic action

I still find it strange that many franchisors fail to grasp the huge benefits to be accrued by having in place a structured and pro-actively driven franchise resales process. I am not sure of the reasoning behind this rather blinkered approach – it may be financial, the fear of getting it wrong or simply not seeing value in the process – but whatever the reason there are large numbers of franchisors who are simply missing out.

All franchisees in whatever brand go through a lifecycle. From the excitement of initial acquisition and business launch through to the slightly precocious early years and finally to maturity and stability that can come with experience – often termed the ‘comfort zone’. Franchisees may need to exit at any of these stages but the main time for franchise resales to occur is at this latter stage in their life-cycle when either they wish to retire or are sitting on a golden nugget of territory which is under exploited and the franchisor would like them to retire.

Whatever the stage or reason, franchise resales occur and if left unmanaged can be stressful, troublesome and filled with hassle for all parties. Time to have a structured franchise resales process in place! Of course in this day and age the process doesn’t need to be a burden on the franchisor and their executives, it can of course be outsourced to highly competent specialists.

To my mind there are many benefits gained by having in place a fully functioning franchise resales process. The first and clear benefit is that the franchisor will have, by helping and managing a franchisees exit from their network, a seller who is happy with their time as a franchisee and is grateful to their franchisor for providing them with a full ‘cradle to grave’ support process. This undoubtedly will mean they will speak well of the franchisor once they have gone and not be bad-mouthing them to all and sundry because they were cast adrift during the final stage of their time within the franchise. No brand needs a poor reputation.

The second benefit is that the purchaser, the new franchisee, has a clear and smooth path to entry. Because the franchisor was there to help them and to control the way the business was sold to them they know what they are getting into and are not overstretched financially or operationally. This means the new franchisee hits the ground running and is therefore ready and able to grow the business from its current position as any issues, if there were any, have been ironed out before they take over. Not having any ‘got to fix it’ issues early on gives them confidence to grow which of course means additional fee payments or product sales to the franchisor – a true win-win situation.

This also gives a great PR opportunity for the franchisor which surely is yet another added benefit.

A further benefit is that of maintaining brand presence. If franchisors do not support franchisees during this last phase of their life-cycle or at any stage when they have decided to sell up, the risk is they will shut their doors and simply walk. The result of this action is that the franchisor then has to advertise and re-recruit a franchisee for the territory or location which means additional cost for the franchisor, a vacant location for a period and a new franchisee who has to start from scratch. Far better, surely, to have them take over an established operation and save that cost and hassle for the franchisor.

These are the key items which I believe should be within the armoury of every franchisor no matter how large or small, how established or fledgling. It is a subject I have discussed often over the years with bfa members, at conference, forums and at bfa organised Specialist Seminars

  • Key items for a structured resales system
  • Guide to selling for vendors contained in the Ops Manual
  • Business planning and exit planning process
  • Dedicated management of resales
  • Valuation guidance
  • Guidance for purchasers
  • Template prospectus of sale document
  • Managed negotiations
  • Constant and consistent communications
  • Dedicated solicitor to oversee the transaction
  • Pro-forma Sale & Purchase Agreement (tripartite to include the franchisor)

This list could be expanded to provide finance acquisition advice but I believe the above will satisfy the requirements of most franchisors.
Do I hear a cry of “what about the cost of all this?” Well the costs are not borne by the franchisor. The cost of selling a business lies squarely with the seller and the cost of buying a business lies squarely with the buyer. As indicated previously this service can also be provided very effectively by outsourcing it to a specialist franchise broker at no cost to a franchisor. A well run franchise resales programme will cover its costs easily and when a long view is adopted the benefits accrued through having a new motivated and growing franchisee in place will pay countless dividends to the strategically savvy franchisor.

The Franchise Resales Pavilion at the National Franchise Exhibition 2015

logo for NFEOnce again this year Franchise Resales Ltd is pleased to sponsor the Franchise Resales Pavilion at the National Franchise Exhibition at Birmingham’s NEC on October 2nd and 3rd. This is stand F260 on the exhibition plan and is situated next to the VIP Lounge.

Since 2010 The Franchise Resales Pavilion has showcased the wide range of existing franchises which are available to purchase by new franchisees.  Once again this year we are illustrating the strength of buying a franchise resale on The Pavilion displays and Julie Taylor, our MD, will be speaking on both days in the seminar theatre about the Pro’s and Con’s of buying a franchise resale.

Franchise Resales started down the route of sponsoring the Franchise Resales Pavilion five years ago after many discussions with the exhibition organisers. We feel it part of our responsibility as Affiliates and active members of the British Franchise Association to provide as many options for prospective franchisees to investigate as possible We believed there was the need to offer prospective purchasers of franchises the ability to explore the full range of options available – not just new start business but also the chance to acquire an existing business, a franchise resale.

The UK franchise community has been established for around forty years and has developed to encompass over 40,000 franchised units operated by approximately 23,000 franchises. So a little like the ‘baby boom’ running through the UK population there are a number of franchisees who are approaching retirement.  Typically a mature franchisor would have about 10% of their franchised network considering retiring so they will be actively seeking new franchises to join to replace them either with a new site or by taking over a retiring franchisees business.

These retiring franchises seek to realise a return on the time, money and effort put into developing their business and a franchise resale provides that opportunity for them.  It also provides the opportunity for a new owner or owners to take on an already trading business and grow it further and faster than they would be able to do with a new start business.

A franchise resale provides a trading business from day one.  This brings immediate cashflow, brand presence and if required staff and premises already in place for the new owner to develop and drive.  In addition because there is a trading history to prove the success of the business funding for the purchase is that much easier to secure.  We at Franchise Resales Ltd feel these benefits make the investigation of existing business a vital part of the research and due diligence which prospective franchisees should carry out.

The Franchise Resales Pavilion (stand F260) will showcase a range of existing franchises for resale across most business sectors.  The team on the Franchise Resales Pavilion will be on hand to discuss how the acquisition process works, and how the unique Franchise Resales support system guides prospective purchasers through the maze and hurdles of business acquisition.  They are also able to discuss with prospective sellers of franchises and franchisors how to optimise business value and provide a step by step process for sellers to achieve their goal – a successful franchise resale.

See you on October 2nd and 3rd at the Birmingham NEC.

New team members sought

Franchise Resales achieve another record year sales.

With an increase of nearly 50% on the previous year’s performance Franchise Resales have had a very successful year up to March 2015.  A new operating base and restructured team are enabling Franchise Resales to assist more and more franchisees who are seeking to capitalise on their money, time, and effort they have put into their businesses.
Many franchisors now outsource the potential hassle of the resales process to Franchise Resales whilst individual franchisees can approach us independently. The experienced Franchise Resales team have either been senior executives within UK franchising or franchisors themselves – all highly qualified to help franchisees and franchisors.

With eyes firmly set on further growth Franchise Resales are now seeking other franchise professionals to join the team and deliver the tried and tested Franchise Resales system and processes.

Ride the economic wave

There seems to be a general sense of optimism beginning to flow around the country – thank goodness I hear you cry, it’s been a long time coming.

Naturally not all people are feeling this nor are all sectors of business thriving but within franchising and especially with the sales of existing businesses – franchise resales – most things are on the up. Franchising has always been that bit more secure than new-start stand-alone operations and buying a franchise resale with all the added benefits that accrue from doing so makes it even more secure.

This inherent sRide the economic waveecurity is one of the things I impress upon would-be investors looking at buying a franchise for the first time. Primarily prospective franchisees will think about it as a source of income, which of course it is. But buying a franchise isn’t like buying a job. It’s a real investment; one that, with the right level of input, should ensure the business appreciates in value over the term of the franchise agreement and enables it to eventually be successfully sold on to new franchisees.Buying a new franchise, one with a territory for example, will involve the initial franchise fee payment, and will then require the input of the franchisee who, with the support of the franchisor, should market and grow the business until it is profitable. If, after five years, which is the typical term of a franchise agreement, the franchisee then wishes to sell, multiples of the initial outlay should be able to be recouped based on the business’s success over that period.

Buying a franchise resale is a slightly different story, requiring a greater amount of due diligence by the purchaser, and a more robust breaking down of the figures – particularly turnover and profit. The upside to buying a franchise resale however is that it is much easier to see how well a business has performed, versus how well a new business is likely to perform. It’s an important distinction. What it means is that, while buying a new franchise can to some extent be ‘finger in the wind stuff’ buying a resale is more comfortable in the sense that you know the track record of the business at the start.

With detailed provision of information by the seller – not just the accounts – and careful assessment, you the prospective purchaser, will be able to unpick the business. This will enable you to see if there are areas where it can be improved: has the former franchisee been as hot on local marketing as you intend to be? Are there logistical elements to the business that can be tweaked to boost performance? What were the former franchisee’s personal circumstances – why is the business for sale? These are all things to consider when purchasing a resale as they give clues as to where you might be able to take the business in the future. And it’s imperative to look at the business from all angles. A bit like buying a house – you need to see it at different times of the day and different times of the week…does that irritating Cocker Spaniel bark all of the time?

When buying a franchise you’re making an investment, and you want it to be as informed as possible. Once you’ve put ink on paper, you don’t want to discover that all of your imagined nightmares are quite real. Which is why using a service such as that provided by Franchise Resales Limited genuinely helps to smooth what could otherwise be a challenging process for franchise sellers, potential franchise buyers, and franchisors. Franchise Resales aims to remove the potential hassle from the resale process for both purchaser and seller. Starting with the planning of the sale, Franchise Resales pulls together all the details of the business that any prospective purchaser will want to see and discuss. The whole Franchise Resales system and process is designed to make the experience for buyer and seller one which is smooth and structured.

In a nutshell, sellers require a structured approach because they want a swift sale of the franchise they’ve worked to build; buyers do because they want to invest in a going concern but need to understand the detail of that business and so make a confident investment; and franchisors (with an entire franchise network to worry about) want an experienced third party to handle the complex resale processes and remove the headaches that can come from brokering a franchise resale.

At Franchise Resales, we have a team with real experience in making the buying and selling of a franchise as seamless as possible. As with many things, it’s about entry and exit. And we at Franchise Resales like to ensure the revolving doors are as draught-free as possible.

A decision to go into business

A decision to go into business

The Christmas and New Year holiday period is often used as a time of reflection.  A time to get things into perspective and to become grounded with family life once again after a pretty strenuous year crust earning.  This reflection will frequently raise questions about the balance of one’s life in relation to that spent in an office / behind a steering wheel / in yet more meetings, whilst not knowing when the call will come about your future employment, or lack of it.  Such are the times in which we live and such are the drivers of thinking about going into business for yourself.

Franchising is clearly a logical option to investigate when extending this line of thinking.  The well-known statistics about the security of a franchise system fully followed by enthusiastic franchisees as opposed to the high proportion of new start failures when going it alone are well known by readers of Business Franchise Magazine.  Though buying into a franchise is a logical way to go into business it is a process that must be approached with eyes and ears fully open.

It’s one of the things I impress upon would-be investors looking at buying a franchise for the first time. Primarily they will think about it as a source of income, which on one level of course it is.  But buying a franchise isn’t like buying a job. It’s a real investment, one that, with the right level of input, should ensure the business appreciates in value over the term of the franchise agreement.

Buying a new franchise, one with a territory for example, will involve the initial franchise fee payment, and will then require the input of the franchisee that, with the support of the franchisor, should market and grow the business until it is profitable. If, after five years – the typical term of a franchise agreement – the franchisee then wishes to sell, multiples of the initial outlay may be recouped based on the businesses success.

Buying an existing business (a franchise resale) is a slightly different story, requiring a greater amount of due diligence by the purchaser, and a more robust breaking down of the figures – particularly turnover and profit.

The upside to buying a resale however is that it is much easier to see how well a business has performed, versus how well a new business is likely to perform – fact versus projections. It’s an important distinction. What it means is that, while buying a new franchise can to some extent be ‘finger in the wind stuff’ buying a resale is more heart-warming as you know the track record of the business at the start. You hit the ground running with an already trading business.

With detailed provision of information by the seller and with careful assessment you, the prospective purchaser, will be able to unpick the business and see if there are areas where it can be improved. Has the former franchisee been as active with local marketing as you intend to be?  Are there logistical elements to the business that can be tweaked to boost performance?  What were the former franchisee’s personal circumstances – had they suffered illness or gone through a divorce?  These are all things to consider when purchasing a resale as they give clues to where you might be able to take the business in the future. And it’s imperative to look at the business from all angles. A bit like buying a house – you need to see it at different times of the day and different times of the week…does that irritating dog of the neighbours bark all of the time?

You’re making an investment, and you want it to be as informed as possible. Once you’ve put ink on paper, you don’t want to discover that all of your imagined nightmares are quite real. Which is why using a service such as that provided by Franchise Resales genuinely helps to smooth what could otherwise be a challenging process for franchise sellers, potential franchise buyers, and franchisors.

In a nutshell, sellers require a structured approach because they want a swift and smooth sale of the franchise they’ve worked to build; buyers require one because they want to invest in a going concern but need to understand the detail of that business; and franchisors (with an entire network to worry about) want an experienced third party to handle the complex resale processes and remove the headaches that can come from brokering a franchise resale.

At Franchise Resales, we have real experience in making the buying and selling of a franchise as seamless as possible. This includes not only the provision of detailed information but also support with negotiation, the introduction of solicitors for the legal process and banks to secure funding – yes funding is readily available for Franchise Resales structured transactions.  Most importantly we are there for support and to provide solutions should anything not go according to plan.

Enjoy the festive season ahead.  This can be a time of reflection and some will use this time to contemplate their futures and explore the benefits of purchasing a franchise resale to start a new phase in their business life.

Obtaining funding

Every business whether an international PLC, a multi-unit operation or a single operator business requires funding.  This applies just as much to a franchise resale acquisition, all require that lifeblood of any business – adequate funding.  It may be you are able to acquire the business from personal or family money removing the need to go to a bank but for most resale transactions this is not the case.

Whilst there are various avenues open to obtain funds, the usual route is to opt for a loan from one of the main banks that specialise in and actively support franchising. It is here however than many plans for owning a business can come to a halt due to poor preparation.  The key to successful funding is a planned structured approach. Those of you who attend bfa accredited franchise exhibitions will have had the opportunity to participate in the Franchise Finance Business Planning Clinic providing an insight into the realms of business plans and the secrets of success.

When approaching a bank there are some points to bear in mind if you wish to be successful in your application.  Firstly don’t leave it too late to make an approach.  An initial enquiry will register you on the banks radar and will provide some basis information about the process involved and their individual requirements.  Secondly don’t just pop into your local branch of the major high street banks.  As with much in the franchise sector you will require specialist advice from a franchise specialist so in each case make contact with the franchise units of the banks.  The best place to find out their contact details is via the British Franchise Association web site www.thebfa.org. The main banks involved in funding for franchises are: Lloyds Banking Group, HSBC and RBS/NatWest though MetroBank are newly entering the market.

The next point to consider is that any borrowing will require some form of security.  This may be provided by the bank taking a charge over your house or other property or, if you do not have any available equity in your property or do not own a property, via the government’s Enterprise Finance Guarantee Scheme (EFG).  The EFG was put in place to provide funding for enterprises where there was not adequate security available to establish a business.  The EFG scheme can be used for both new starts and resales.

Whilst the EFG scheme sounds like ‘manna from heaven’ the basic requirement before being able to secure funding via this scheme is to have your entire business plan and projections approved by one of the above banks.  They will put your application forward for approval under the scheme.

The core element of any funding proposal is the Business Plan.  This is not just a cashflow projection; it is a comprehensive summary of the whole business.

A successful business plan will include a cashflow and profit forecast for the business and this will probably cover at least three years trading.  These must be backed by solid logic so there is no point taking a business generating a small profit and expecting a bank to accept the business will, for example, double in size within the first year – without some concrete evidence of how this will be done.

The business plan must also cover the marketing and sales activity that will be carried out and how you see the current shortcomings of the business being overcome by your activity.  A SWOT analysis is the best way to tackle this. Finally your personal background CV and skill-set must be included as well as a detailed statement of your personal finances – a personal profit & loss account. All of these elements together comprise your business plan and funding application.  They will of course also form the base upon which to monitor the growth of your future business.

Take your time

Avoid pitfalls, take your time.

Quite a lot of our time at Franchise Resales is spent in one to one discussions with franchisees who are seeking advice about optimising the value of their businesses and planning their exit from their particular franchised network.  The vast majority of these are seeking to realise the value of their investment in their franchise to be able to retire or occasionally a franchisee will be looking to sell to move on and acquire an alternate franchise.

Sometimes however the call comes from a franchisee who just doesn’t like the franchise they have bought or has been offered an employed position by an external company and who wishes to return to that world.  In each of these situations it is very difficult to be able to offer a cost efficient solution to the franchisee concerned.  This is because the businesses involved have usually either hardly got off the ground or have slipped in terms of financial performance as the owners focus has moved away from developing the franchise to pursue other interests.

In each case, a discussion with the franchisee who is wishing to sell, usually indicates that they had not spent very much time investigating the world of franchising.  They may have not understood what it means to be a franchisee and had not established whether the particular brand under investigation or franchise life in general actually suited them.  Most franchisors that are members of the British Franchise Association (bfa) adhere to the bfa code of ethical conduct and spend considerable time in discussion with franchisees prior to allowing them to sign up and join their particular franchised network.  They can however only do so much.  It is up to a franchisee who is looking for a business to apply a bit of due diligence to their investigations themselves.

Owning a franchise is not like having a job – there is usually very little or no income available at the end of the month if sales are not generated.  The success of a franchisees business depends almost entirely on the effort and energy employed by that franchisee.  It may be that some leads and enquiries are generated through the franchisors central operation but usually franchisees are expected to generate their own sales turnover.  So one of the skills or personality traits that every successful franchisee has to develop is the ability to get on with and interact with other people in a business context.  Some of the best sales people are likeable individuals and most folk want to do business with people they like so this element of a potential franchisees skill set is crucial.

One place to find out what it is like to be a franchisee is by attending one of the “Real Franchise Stories” panel discussions at the franchise exhibitions held in Manchester (June) , London (September & March)  and Birmingham (October & February).  Here you will be able to ask questions of current franchisees who have made their time available to help those considering buying into a franchise, hearing how it was and is for them being franchisees.

There is also the situation where a franchisee doesn’t like the ‘day job’ of the business they have entered. It is difficult to be a motivated and enthusiastic driver of a business that you just don’t like doing.  Sometimes this has been because there wasn’t enough research carried out or discussions held with existing franchisees before the commitment to join was made.  Our advice in Franchise Resales is always to take that extra bit of time and speak to as many existing franchisees as possible within the brand you are investigating before making a decision to join.

A good way of seeing whether a particular business is for you is to look at a franchise resale – to buy an existing franchise from its current owner rather than stepping into the unknown with a greenfield location.  A franchise resale has clients and business from day one; it has everything in place for a new owner to take over and develop further and most importantly the brand is already known in the local marketplace. In other words you know what you are getting in to; the evidence is there in terms of trading history and business performance.
Franchise resales are available in most business sectors and to see a list of those currently available, click on our Buy a Franchise tab because as indicated at the start of this article many successful franchisees are now planning retirement so there is a growing number of franchise resales opportunities coming to market.