Is Franchising a Good Exit Strategy for Small Business Owners?

“Exit strategies” is a term often attributed to big business; but it’s as, or even more, applicable to small business owners. Are you one of those people who rather not to think of the inevitable time when you’ll get older and want to slow down? If your children aren’t going to be involved in the business, who will carry on when you want to retire? You may believe that you can sell the business when the time comes. This is a good option when there are no transition plans in place; however it’s important to consider early enough whether the value of the business is sufficient to ensure you have the retirement income and lifestyle you want.

For some small business owners, franchising may be the best investment and exit strategy vehicle to ensure the retirement they desire.

  • Franchising creates multiple locations that increase the value of the business.
  • Franchising creates a network of distribution that can be used by others making it an appealing acquisition prospect for many companies.
  • Franchising directs the business owner to more “big picture” thinking patterns and away from the worries of the daily operation of a single location. This new emphasis inevitably results in increased value.

However, you need to understand that franchising doesn’t create an increase in value overnight. It takes time to grow a network of franchisees. There is also the initial investment to develop the systems, comply with federal and state regulations as well as to recruit, train and support franchisees. As franchises are sold and the network grows this initial investment is recouped, yet franchising is not easy and should be considered carefully.

Franchising a business changes the nature of the activities you, as the owner, perform. In other words, when you franchise, you change your business; you become a franchisor and your main activities are the recruiting, supporting and training of franchisees as well as the protection of the brand and innovation. Not everyone is suited for this type of transformation. But if you are willing to embrace change, franchising is a rewarding method of increasing the value of your business and its appeal to buyers in the future thus becoming a viable and profitable exit strategy when the time to work less and enjoy more comes.