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How to get your franchise network sale-ready

Sarah Stowe

How do you prepare your business to make it the most compelling acquisition for discerning investors?

Don’t skip this article because you’re an emerging franchise or you are not considering an exit strategy at this point. This is a story everyone even THINKING about franchising their business should read now!

This is the deconstructed roadmap to building the most valuable network, it’s a reality check to assess how your network is doing, and it’s the guide to preparing for an exit now or in the future.

In an ideal world you prepared for the day you were going to sell when you set up your network because that’s when some of the key decisions that will impact your enterprise value should have been made. But read on.

Just like homeowners on the ubiquitous reality home shows, now is the time to fix all those nagging problems. From a quick patch up and paint job to totally remodelling the kitchen and bathrooms, the size of the job will depend on the state of your house and what you want to achieve at sale.

The thing to remember here is that your potential investors will conduct their due diligence with rigour. They will be meticulous in examining every element of your business, so if you’re thinking of just papering over the cracks, it probably won’t be worth your time and effort.

That’s why it is timely to conduct your own strategic assessment every couple of years to reflect on your immediate and longer term goals and reset your priorities. It’s equally important to assess the market, as being ahead of trends and aware of changing economic conditions allows you to position your network for long term growth and sustainability.

Call it routine maintenance, but even thinking of selling your business, sharpens your focus to its value and what you need to do to preserve and consolidate it.

What investors are seeking

An exit strategy aims to create a liquidity event via the partial or full acquisition of your business. There is always interplay between risk and return so you need to articulate how you will mitigate the investment risk while reinforcing the likelihood of attractive returns. Balancing risk and protecting enterprise value are the core objectives whether you are a franchised business, corporate or distribution network.

Buyers look for franchise networks that provide the following:

  • Are demonstrably profitable with consistent revenue streams from franchise fees, royalties and supply rebates;

  • Have well documented systems, processes and legal agreements;

  • Have well-functioning operational infrastructure, training and support resources’

  • Have profitable, compliant, happy franchisees’

  • Can operate without the constant involvement of the franchisor;

  • Have a demonstrated ability for innovation and resilience to weather fluctuating markets.

What’s next? Find out more about gearing up for the sale of your franchise network.