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Why Planning for Your Exit Strategy Before You Sign a Franchise Agreement is Important

Exit strategy

Exit strategy

You are ready with the resources on your side. You revved-up and ready to invest your money in a good franchise. Your next step is to find which franchise to partner with and to invest in, and after that you are ready to start making money.

We are ready to go, right? Well, not quite.

Let us go back a step or two in your plan. There is one more thing you need to heed before buying a franchise unit. Unlike other type of businesses, franchising, in my own experience, requires more commitment on your side. That being said, you need to seriously think about your exit strategy that mainly answers this question: How to sell your franchise unit.

Knowing the end before it started

An exit strategy is all about what you will do if a certain scenario happens, such as: What if things gone badly and you want to terminate the partnership with your franchisee? What if things go so well, that you want to sell your franchise unit to an interested investor for a major capital gain? What if there are inconsolable difference between you and your franchisor?

Your exit strategy should be communicated thoroughly with your franchisor, even before you sign the franchise agreement. If both of you are happy, move on; if not, bail out. As I mentioned in my previous article, franchising is about relationship between franchisee and franchisor.

Quitting from a relationship has always been difficult, either in your personal life or your business partnership, especially in franchising.

Ready your business plan, and include your exit strategy inside

Presenting your business plan to your franchisor, required or not, is plausible – Your business plan should contains what the essentials, such as your financial numbers (including the projected ones), your competition analysis, your marketing plan, and your exit strategy. Never forget your executive summary, where everything is summarised in a couple hundreds of word (and where most read in your business plan.)

In the other hand, you should ask your franchisor for a business plan, at least the summary of it to learn the direction of the franchise is going. This way, both you and the franchisor will get a snapshot of the future, and along with your exit strategy, things will be easier when you decide to quit, eventually.

Again, settle things that could end your franchise partnership are highly recommended, even before you sign the franchise agreement to avoid future problems, which in the worst case could include a lawsuit.

Ivan Widjaya
Plan your exit before you even start
Image by btafly.

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