How resale cultured are you?

How resale cultured are you?

Does your franchise offer the right environment for a smooth resale? Derrick Simpson reveals how this can be achieved

 

The articles I have written for Franchisor News about the resales process reveal a systematic approach to create a structured resales strategy. Mostly, this approach is based on the well-known adage Proper Planning Prevents Poor Performance (PPPPP). By having the right systems and process in place, combined with professional advice and easy to use documentation, the hassle of managing resales can be minimised. Whether you use external facilitators or manage the entire process internally, the basis of all the previous articles is that ‘the system is king’.

The whole process, however, works more smoothly when there is a basic understanding and acceptance of resales amongst the networks’ franchisees. Franchisees should understand that they are part of a cyclical process and that everyone who joins a franchise network will eventually leave it and planning and working towards their eventual exit is an important part of their business strategy to optimise their exit position. That is when the franchisors resales activity and processes are truly effective.

So how are we to achieve this nirvana? What are the ways in which we can create a culture of accepting resales within the network? The answer is reasonably simple – communication and talking to franchisees.

Crystal clear
Creating a resales culture is about taking the mystique out of the process as this reduces fear. Clarity removes uncertainty, and clear communication with franchisees enables them to have open discussions about leaving, which eventually helps create a resales culture.

I mentioned the word fear deliberately as people are often scared or concerned about things they don’t understand. Plus, given the fact that most franchisees only sell a business once, they don’t understand how to approach it or what the process involves. It is important not to underestimate this emotion because it is at the root of most of the angst that can occur in resales discussions between franchisors and their franchisees.

The way to overcome any friction is to set out the resales process from day one. Your entire resale process and its associated documentation should all be in a guide selling your franchise. Ideally, this document would form part of your operations and procedures manuals. This means that from day one when the franchisee joins, there is a description of the process of how they leave within the documentation they receive.

The cynical view is that operations manuals are never read, but the point is they are read at least once, and the information will register: there is a process in place, which can be referred to in the future. They may not have instant recall about the detail but the knowledge that such a document and process exists will be there.

End of the day
The second step, which in a timeline occurs before they get the manuals, is to discuss selling as part of the recruitment process. If, while you are discussing your opportunity with prospective buyers, you can show you are not only interested in bringing them in – with all the attendant support processes, etc – you are also supporting them at their exit and can demonstrate a life cycle for them. This surely will encourage even more prospects to want to join your network.

This discussion also provides the opportunity for you to talk about the way to increase the value of your franchise opportunity by adhering to the operating processes and actively driving the business through the implementation of your marketing activity. An additional benefit is that this discussion enables you to demonstrate the value of joining your network. You can show the value of the business into which they are buying is not just about how much they can make in the drawings each year, but that it is about the totality of the income generated through the franchise as they grow the business. This includes drawings, re-invested profits and eventual selling price – a fully rounded offering.

This initial discussion and supporting detail in the operations manuals cannot be the end of the process. To truly create a culture that is accepting of the resales process and one which will accept the need for a structured exit as well as induction, it is important to maintain the subject as an ongoing discussion. Clearly, this is not to be the key topic at all meetings but to include exit planning seminars – delivered either by yourself or using an external facilitator – at annual conferences or regional meetings for example, which will keep the franchisees focused on the end game.

If your franchise has business support people working with the franchisees on a one-to-one business planning basis, it is important they also understand the resales processes and especially what the key levers within your industry sector are that will drive profitable growth. By encouraging franchisees to focus on their end game and grow from £X profit to £Y profit over a number of years to achieve £Z selling price, it means growing the sales from £A to £C. To do this they need to implement marketing and sales initiatives and, lo and behold, there is a growth in the franchisee’s business that is mutually beneficial as it means you receive growth in management services fees. It is this combination of mercenary thinking and individual coaching that combines within a resales culture.

Creating a resales culture in your network and focusing all franchisees on the strategy for their eventual exit will bring mutually beneficial growth. Surely that is what this symbiotic relationship is all about.