Why is an exit strategy important for a fledgling franchisee?

It’s uncommon for a franchisee to have a right to terminate its franchise agreement part-way through the term, so it’s important for a franchisee to have an alternative exit strategy, which is usually through the sale of the franchise business.

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. However, if the business is not a success or if a franchisee’s circumstances change and they’re unable to continue to put in the work needed to drive the business forward, it may also be necessary for the franchisee to sell the business.

Therefore, before purchasing a franchise a franchisee may want to consider how easy it is to sell the particular business by researching past franchise sales, as well as asking what procedures are in place for the franchisor to approve sales.

It’s also useful to ask the franchisor about what assistance it provides to franchisees looking to sell and to check if the franchisor includes a right of first refusal in the franchise agreement.