Franchising has helped business owners take their business to the next level. They were able to do so with the help of franchisees who opened new stores through their finances and experience. There have been instances where the franchises have outgrown themselves, either on their knowledge base or don’t have the capital or expertise to continue growing. Or they might just want to cash out of the business to enjoy a different lifestyle. And eventually will start to look for investors. Whether you might face or are currently facing these scenarios, these tips to prepare your franchise system for sale will help you set up your business and make it attractive for investors.
Document adequate information about your franchise system
The most crucial step would be to maintain sufficient information about your franchise system. For instance, data on how the franchisees are doing, how your royalty streams are coming in, documentation on processes and procedures, material on how you communicate with franchisees, system-wide policies, etc. Keep all the information organized and handy in order to help anyone understand your system better.
Any investor would like to know about the health of the system in place and how well it is maintained. For example, having too many unhappy existing franchisees might make it difficult to expand. But having no record of feedback from happy franchisees too might make the decision difficult.
With all the information in place, a private equity firm will be able to simply see what you have established, what your franchisee base is like and what your target franchisee looks like. This will help you to analyze together how you’ll be able to grow with private equity funding.
Evaluate the corporate management team.
The decision on who will continue to lead the business and who is ready to retire will be next. Evaluate who will continue to be on the corporate management team. This helps the investors understand if they need new members on board to advise on important issues.
No matter if you continue with your old team, or have a new team, there are always options that you could explore with your investors on what is the best way to achieve the long-term goals for your business.
The sale of the franchise system might take a long time and is rarely done overnight. It could vary anywhere from 3 months to one year. But what is important is that you find the right partner for your business. Therefore, it is important and wise to maintain a well-organized and documented system to enable you to make an efficient exit.
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