Growing a Franchise
The valuation, legal steps and tax implications are just part of the equation when preparing for a franchise acquisition. Here’s what sellers should know about the impact on their existing teams.
For franchisees planning an exit, the preparation process is often long and requires attention to many different factors. In addition to the financial and legal steps an owner must navigate when preparing for an acquisition, some owners find themselves asking, “What happens to my employees when I sell my franchise?” After spending years growing a business together, owners may feel an obligation to their staff. Transitions like new ownership can cause feelings of uncertainty among teams, which is natural, but in many cases, employees are actually very safe and represent a critical asset for the new owner.
Entrepreneurs seeking a franchise acquisition rather than building their own franchise from the ground up recognize the value of a franchise resale. In taking over an existing business, the new owner not only bypasses the development timeline associated with a brand-new franchise but also inherits the local brand awareness, customer base and trained teams the previous owner built. When a new owner steps into an operation, having trained, knowledgeable staff who can protect revenue and client trust from day one (while that new owner adjusts) can make a big difference.
Building a new franchise location can require months of recruitment and training to get the right teams in place. The ability to enter a business in which all of this work has already been done is one of the primary reasons people pursue resale opportunities. An existing team is an immediate operational asset.
“Walking into an existing business definitely has its advantages,” said David Leonardo, CEO of Chill-N Nitrogen Ice Cream. “You’re walking into a staff that’s already been trained … While there will always be things to tweak — marketing, operations, cleanliness — you can do that much faster than starting from scratch.”
For Nathan and Sommer Bradds, franchise owners with Caring Transitions, these “tweaks” came in the form of small shifts and efforts to build up existing teams rather than a complete reset.
“We bought a couple of existing franchises and were focused on retaining the right employees and putting them in the right spot,” Nathan said. “We've grown tremendously, about 50% growth in year one and we've doubled the staff.”
In addition to the practical benefits of inheriting an established team, many new owners recognize a team’s desire to continue their own professional growth. For a franchisee who is equally interested in professional success, it’s a natural decision to keep these people on board and grow together.
Experienced employees are often an asset to a buyer, giving new owners a good reason to keep the existing team in place. Still, there's no guarantee that every employee will stay on, and new ownership may bring changes to staffing or day-to-day expectations.
A new owner-operator will generally bring a new perspective to the business. There may be closer daily supervision, new processes or different operational expectations, but the changes are generally made with the ultimate goal of elevating the existing staff and business in mind.
“Regardless of what little things [a new owner] may need to tweak, whether it’s on the marketing, operational or cleanliness front … There are always going to be things [they’re] going to want to adjust and make it [theirs],” Leonardo said.
Because a baseline has already been set, these changes can be made relatively quickly, and they’re still much quicker and easier for all parties than learning and building a new business from the ground up.
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