Franchise Resales: Making a Clean Transition to a New Franchise Owner
Alice Tuffery, writer
Published at 14/11/2020, Updated on 04/05/2022 , Reading time: 5 min
If you’re in the process of buying or selling a franchise business, you’re probably keen to complete the transition and move forward as fast as possible. But it’s in everyone’s interests to make sure the process runs as smoothly as possible. Here’s how to manage a franchise resale handover.
Before we get to discussing the transition period, you might be interested in finding out more about what’s involved in a franchise resale and how you can make sure you get a great deal. See our other articles in this series below:
- Franchise Resales: 4 Benefits Of Buying A Previously Owned Franchise
- Franchise Resales: Planning A Smart And Seamless Exit Strategy
- Franchise Resales: How To Determine The Value Of A Franchise
- Franchise Resales: 8 Steps For Selling Your Franchise Successfully
If you’ve done all the hard work and exchanged contracts, it’s time to plan the franchise resale transition period. Here are the steps you should take during the handover, starting with the most important consideration.
Allow enough time for the transition
The first step in planning a franchise resale handover should be to allow a good chunk of time. Although the new franchisee will want to get up and running quickly, and the existing franchisee will be eager to move onto new projects, don’t rush the transition.
The seller will have a wealth of knowledge and experience in running the business, and has plenty to offer the buyer to help them maintain its performance. By allowing time for training, the existing franchisee can help the newcomer avoid potential pitfalls and give them the in-depth know-how they need to make their specific business profitable.
As the franchise resale is finalised, the parties involved should negotiate a transition period. The new franchisee will probably ask the seller to stay nearby for as long as possible, so it’s up to the existing franchisee to give a reasonable amount of time. Usually, a few weeks or a couple of months will suffice. During the handover phase, the seller should spend time at the franchise location, before offering to provide support over the phone for a few weeks afterwards.
Tips for existing franchisees
Be transparent with employees. It’s important to remember a change in business ownership doesn’t just affect the owner; employees may feel concerned about the future of the franchise unit and how they’ll fit in. Some may even take it as an opportunity to finalise their retirement plans or find another job. So, once the franchise resale has been confirmed, keep your employees up to date with developments and answer their questions.
Tell suppliers about the ownership transfer. Take the time to update any business partners and introduce them to the new franchisee. They’ll need to set up new credit accounts in advance of their first day, and might like to discuss any potential issues or considerations for the transition period.
Consider signing a non-compete agreement. If you’re not retiring or relocating, the new franchisee may be concerned you’ll set up another company in the area and use your experience and contacts to steal their business. In this case, you may be asked to sign a non-compete agreement, which stops you launching a rival business.
>> Read more:
- Franchise Resales: 4 Benefits of Buying a Previously Owned Franchise
- Franchise Resales: The 6 Legal Issues You Must Think About Upfront
- 7 Tips for Finding a Franchise Resale in Your Local Area
- What to Look Out For When Buying a Franchise Resale
Tips for new franchisees
Complete all your legal requirements in good time. Taking too long to finish all the administrative franchise resale tasks can result in the existing franchisee becoming frustrated and the franchisor refusing to authorise the transfer. So, make sure you finalise all the paperwork, pay any outstanding fees and meet all the solicitor’s requirements within the deadlines.
Complete your training. Franchisors usually ask new franchisees to take their training course and won’t approve the franchise resale until they’ve passed some form of assessment. If you want to increase the likelihood of a smooth transition, you should throw yourself into the training. Take advantage of the expert support on offer, as this will not only satisfy the franchisor, but help you see success in the coming years too.
Meet with your new employees. Most franchisees selling their business leave their staff in place for the next owner. If you’re taking on an existing workforce, don’t overlook the importance of your initial meeting. They’ll probably be anxious about how you’ll run the unit and how you’ll treat them, so go out of your way to make a good impression. Ideally, you should aim to get to know them on a personal level.
Meet with your new clients. Depending on the business and how it interacts with customers, you may need to put in a bit of work to reassure your clients they’ve got nothing to worry about. Often, people are loyal to a brand because of its personalised service, so it’s worth establishing a relationship with the customers you inherit. If it makes sense for your business, you could have informal conversations about the transition and even ask for suggestions on how to keep clients happy.
>> Read more:
- Franchising 101: The Official Franchise Start Up Checklist (Part 1)
- Franchising 101: The Official Franchise Start Up Checklist (Part 2)
- New Year, New Career: No Better Time Than Now to Start a Franchise Today
- Franchising 101: 8 Signs You're Ready to Start a Franchise
- Starting a New Business Doesn't Always Lead to Immediate Success: Here Are 5 Ways to Change That
- It's Never Too Late to Start a New Business
Executing the franchise resale transition successfully
Franchise resales can be complicated; there’s lots of admin to complete and there will probably be a couple of hiccups along the way. As a result, it’s vital to allow plenty of time for the handover phase and plan the transition thoroughly.
Existing franchisees should think about what sort of training they might provide, what information and expertise they’d like to impart and how long the process could take. Then, they’ll need to factor in enough time for the new business owner to finish the franchisor’s training scheme.
The previous franchisee’s guidance should always complement the general induction programme provided to every new recruit and, in most cases, be specific to the franchise unit. When planning the franchise resale transition, the existing business owner should ask themselves what someone else would need to bear in mind when running their unit.
You can find more useful information on the world of franchising by browsing our range of articles. Or, for guidance on running a franchise business, see our articles for franchisees.
Alice Tuffery, writer