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The Importance of an Exit Strategy in Franchising

Aug 17, 2007
As the franchisor or franchise operator, you probably know what you need to stress when you're making a pitch to a potential franchisee. You have to expound on the prominence of your brand as well as the exceptional systems that you have in place. But you may be forgetting to include something that would cinch the deal.

A franchise business derives its allure for potential investors from the independence it gives the business owner. In a franchise, the franchisee can make an investment in the franchise, build his equity and then get out. He is not personally responsible for the brand or the business, unlike an enterprise that's been built from scratch. Turnover of management is expected to be less hassling in a franchise than in any other type of business.

Thus, when you entice a potential franchisee to come aboard your franchise operations, you need to present the venture in such a way as to make both entrance and exit clear to your prospects. This is fair to the franchisee for he will know exactly what to expect if and when he wants to let the franchise go. Would he be selling at a profit or loss? How easy can he sell his franchise out? These are questions that a clear exit strategy answers for the franchisee. On your part, a clear exit strategy makes your franchise offer more attractive for potential franchisees and so you get to expand your business and build your brand quicker. With more franchisees joining you, you increase your buying power and you increase revenues without any additional capital investment.

For a clear exit strategy, you must be able to document all the support that your franchisee can get in the business. You will have to create an easy to read and comprehensive manual detailing the full business operations from purchasing, to preparations and deliveries. There should be sections on personnel management and management practices. The technologies and business systems that would be useful in your particular franchise should also be included in the franchise package as well as enough training to make this technology significant.

By documenting every step of the franchise operations, from the most significant to the least important, you are creating a clear concept that could easily be turned over to another owner, whether he is your potential franchisee or the one whom your franchisee is thinking of selling to.
About the Author
Tristan Andrews writes useful articles about franchises. Discover and explore the world of Franchising. Find out how owning a franchise can expand your financial horizons at http://www.franchise-guide.org/
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