Why do I need a franchise exit strategy?

Starting a franchise is an exciting venture, but it’s easy to focus entirely on the day-to-day operations without thinking about what comes later. One crucial consideration that often gets overlooked is having a clear exit strategy.

Experts agree that planning ahead can save you a headache and provide clarity for both yourself and your franchisor.

What exactly is a franchise exit strategy?

An exit strategy is essentially a plan for how a franchisee intends to leave the business when the time comes.

Brian Duckett, former chairman of The Franchising Centre, emphasises that you should consider this from the very beginning when researching franchise opportunities.

“It’s good practice from the start to be thinking about how long you intend to stay in the system, and how you will know when you have achieved the objectives that will enable you to leave as planned.”

This could mean different things for different people. Some franchisees aim to build a business quickly to sell it for a capital gain. Others may intend to pass it on within their family. Some simply want to earn a steady income for a long period.

“Many of our franchisor clients now ask candidates what their ambitions and exit plans are, and most of them have a section covering the resale process in their manuals,” says Duckett.

Why is it important to have an exit strategy?

Having a clear exit plan is not just a good idea – it’s essential for franchisees and franchisors alike. For franchisees, knowing their exit strategy helps align expectations with the franchisor.

“If the franchisee wants a long and happy semi-retirement, but the franchisor needs the area to be worked to its maximum, or the franchisee expects to sell for £300,000 in three years, but the franchisor knows this is not possible, then they both ought to realise that they need different partners,” Duckett explains.

In addition, discussing exit plans during recruitment can guide the level of support required for each franchisee and ensure the business is operated as intended within the system.

How does an exit strategy protect a fledgling franchisee?

Vicky Wilkes, head of legal at Aston Villa Football Club, highlights that franchise agreements rarely allow early termination. For this reason, “it’s important for a franchisee to have an alternative exit strategy, which is usually through the sale of the franchise business.”

Having an exit plan in place ensures that you can sell the business if circumstances change or if the business doesn’t perform as expected. “The ideal scenario for a franchisee is that their business is a success and after years of hard work they are in a position to sell that business for a profit,” Wilkes says.

What practical steps should I take?

Before buying a franchise, research the resale market for the business. This includes checking how easy it is to sell and understanding the franchisor’s procedures for approving sales.

Wilkes recommends asking franchisors about the support they provide when selling a business and verifying whether a right of first refusal is included in the agreement.

Should franchisors also have an exit plan?

Interestingly, exit planning is not just for franchisees. Duckett notes that franchisors themselves should also know their own exit strategy, which might involve a sale to another franchisor, a group of franchisees, the management team or a trade buyer within the sector.

Having both sides aligned on long-term goals reduces the likelihood of conflict and ensures smoother transitions.

Conclusion

An exit strategy isn’t just about planning to leave; it’s about setting clear expectations, aligning ambitions with the franchisor and preparing for unexpected changes.

Whether your goal is semi-retirement, building a family legacy or creating a business to sell for profit, thinking ahead ensures you are ready for whatever the future holds.