Planning your franchise exit but wondering about the impact of COVID-19? Alistair Glaze, chairman of Business Partnership, advises on how to achieve the greatest return
Whether they’re looking to spend precious time with family, have re-evaluated life goals due to the pandemic or are looking to a good retirement, many franchisees are worried they won’t be able to sell their franchises because of the impact of COVID-19 on the economy. Alistair Glaze, chairman of Business Partnership, the national franchise network of business brokers, wants to combat those misguided assumptions.
“There’s been a marked increase in franchisees needing advice on how to sell their business as the pandemic has pushed them to think more pro-actively, as well as to consider de-risking. I want to explain why anyone contemplating exiting their franchise via a sale needn’t put their plans on hold,” said Alistair.
“Investors with capital are always looking for opportunities, no matter what is happening with the economy. Foreign buyers are also still active in the UK, despite ongoing uncertainty because of Brexit - sterling remains weak, giving UK businesses additional appeal amongst buyers. There’s been a solid demand for businesses that have shown themselves to be ‘COVID-proof’ – in terms of technology, automation and security – but also green shoots for struggling sectors such as hospitality.”
However, if you do decide to take forward your franchise sale, as with any business sale it needs thorough planning and preparation. Alistair shares the simple dos and don’ts of exit planning.
• First and foremost, plan ahead. Where you can, plan two to three years before your hoped-for exit date for the best results. By giving yourself enough time and preparation, you will reduce the likelihood of errors in the process that could be damaging to the success of selling your franchise. However you have a franchise, so if you’re following the defined processes and procedures provided to you, quicker exits are possible.
• Make your business look good. Regardless of what type of franchise it is, make your ‘shop front’ - your premises and website - as professional as you can. First impressions count when selling a business. Following franchise guidelines here usually provides the best results and avoids reinventing things.
• Find a professional business valuer. Seeking guidance helps you put the steps in place to maximise the value of your business to a buyer.
• Take your foot off the gas once the business is on the market. A decline in sales will scare off potential buyers. You need to show the true potential of your business to entice possible buyers.
• Cut or run down staff numbers. It is hard to sell a business where there is only one person who has all the knowledge and skills needed to run it. The sale value is not solely based on profits, so retain your key team to give a buyer confidence that it will continue to run smoothly during the transition as they take over.
• Take potential buyer comments personally. Whilst you may well have invested a great deal of your life in the business, please try to leave your feelings at home.
Preparing to exit a franchise might seem like it’s the end but Alistair believes it’s important for franchisees to realise that for whoever is taking over, it’s the beginning. Potential buyers aren’t buying the past of the business, they buy the future and need to be able to see how it will work in their hands and grow in their hands.
Leave no doubt that your franchise has a viable future with growth opportunities and demonstrate this to potential buyers. Just as important - show the buyer that your involvement in the company hasn’t been focused solely on the immediate performance, but also on the long-term goals. Anyone preparing to exit needs to allow buyers to understand the current position as well as the potential direction of their business.
“Think about how you’d answer questions that a potential buyer might ask. For example, what is the future potential of your business? What are your major competitors doing that you’re not? Be prepared to share your knowledge and understanding of the opportunities that exist within your sector and how they impact your business,” explained Alistair.
“The time that you choose to sell your franchise is vital. On one hand, you need to be aware of how your business has grown and what its current vulnerabilities are resulting from this. On the other, you want to ensure that you have built sufficient value in your business to sell it at the best possible price. Franchisees, whether serial entrepreneurs or would-be retirees, should always be looking at exiting their investment because this is intelligent business thinking.
“During the pandemic, our regional partners have had to adapt their usual day-to-day practices. They’ve had to be more flexible in interactions with potential buyers, offering socially distanced viewings to ensure everyone stays safe. However, even with the impact of COVID-19, there’s still been significant interest from a wide range of buyers.”
Douglas Craig is the regional partner for Business Partnership Bromley, Croydon and South East London. He thinks the pandemic has made people who are employed or have recently been made redundant, evaluate what’s important to them. He said: “I believe the main impact of COVID-19 on the market has been prompted by uncertainty which has made people want to take charge of their own destiny. This has brought buyers to the table who weren’t there before - those who had never even considered running their own business.
“For these people, buying a franchise appeals because it is less risky than starting a business from scratch. Then when they find out that they can buy an existing franchise from an exiting franchisee, it becomes even more appealing as they also have an existing customer base to immediately trade from as well the wealth of support from a franchisor. We also have to work with the franchisor when we’re checking a potential buyers background. These checks have to be carried out so that we can assess whether a buyer’s commercial experience fits in with the franchisor’s requirements. We’re predicting the market will return to pre-COVID levels in terms of business sales confidence by autumn, so I’m expecting to support a number of successful franchise sales before the end of the year.”