Do you have a succession plan for your franchise? You should read this
(Part 7 of the Multi-Unit Franchising Conference)
In the last weeks, I’ve been sharing my learnings of the Multi-Unit Franchising Conference 2021. In this blog post, I’ll share some recommendations for successful succession planning.
Watch the complete Multi-Unit Conference series by subscribing to our YouTube Channel. Review all the related blog posts in our category menu.
Being away from your business doesn’t necessarily mean that you are out of the picture forever. Perhaps you want to take a break and enjoy the fruits of your hard work and labor for years and years.
To approach this topic, a panel of multi-unit multi-brand franchisees shared their best practices. The panelists were:
- Fred Burgess, who operates franchises of Marriott Hotels, Papa John’s, and Twin Peaks.
- Jeffrey Tews, who owns units from Bright Care and Bright Star Senior Living.
- Eric Denver, franchisee of Hand & Stone Massage Spa.
- Paul Booth, franchisee from Ace Hardware and a recipient of his parent’s McDonald’s franchise.
- Jesse Keyset, from Little Caesars, Sport Clips, and Oxi Fresh Carpet Cleaning, was the facilitator.
If you haven’t done anything regarding this process, review their recommendations to start taking the steps to build your succession plan.
When to do it
- Start when you open your business. A succession plan is not only for mature corporations. If the pandemic showed us something is that life can be gone in a matter of hours, days, or weeks.
- Don’t put off this decision. “Don’t let a mess to your family” urged Fred. You know your business in an intimate way and it will be very difficult for your family to make the best decisions for them and for the company. The more you do ahead of time, the less impactful it will be on them.
- Take some time off. Some quiet time will help you analyze the business from a distance, to have a better look at what can be improved and how to approach the succession plan. Jeffrey’s advice: don’t take just two or three days, but a week or two, to return really clean and fresh and make better decisions for your future.
- Look for a Key Man Insurance Policy. This type of insurance supports you as the main person of the organization. Make sure you have the coverage that your business needs so that the people left with it can take care of the company, of yourself, and of your family the right way.
- Value your business every year. Especially if you are opening more units or acquiring businesses as a growth strategy. Based on that value, make the necessary adjustments in your succession plan.
- Make sure there’s a lease assignment to your leases. This will help you transfer to someone else, either your children, an employee or private equity.
- Have a will and a trust. The first will help you establish what you want to happen with your business, and the latter is to protect your legacy from the government taking control of the company.
- Get help from the experts. Succession planning professionals will not only look at your business, but they’ll also consider your family and your personal desires for the business’ future.
- Build to sell. Eric advised building your organization to the size that the private equity will be interested in buying, ideally over $10 million worth. You may not sell it, but you should keep it in mind because there is no guarantee that your kids will take over the business. Another tip he gave in this regard: split the entities based on the brands you operate, so that they are sellable as a package.
Do you have this vision? We can coach you to make the correct decisions! Click here for more information.
Build your leadership bench
- Consider successors outside the family. Maybe an employee could be the next leader, especially if the owner’s children decide not to take over the enterprise.
- Work hand in hand with your general managers. They have to be able to understand the business and the way it generates profit.
- Share P&L’s. Be transparent with your unit managers and supervisors so that they know how to interpret the statements, the financials and monitor the most important numbers of the operation.
Watch this video to get more tips on how to develop your leadership bench.
When it’s a family business
- Get them involved. Taking over the business is not a birthright. Relatives should start at the very bottom and move up through all the ranks in the organization. That way, they’ll get the knowledge, experience, relationships, but also the ability to eventually lead the organization. Paul ran every position in his parent’s franchise, so he could understand the system from an employee perspective.
- Don’t lock children into one business. There is a lot of value in encouraging potential successors to acquire another franchise on their own, as it happened to Paul. This was key for him to learn how the model works and to value what he was receiving.
- Let the successor decide. Jeffrey wants his son to run his company in the future, but this may not happen. He is giving him the time and the chance to decide if this is what he wants.
- Separate your roles. Eric confessed that it’s challenging to wear the boss and the father hat at the same time. You have to find a way to balance the game in order to fulfill all your leadership roles. Let other people be your children’s teachers. That way, you can remain a parent even though they are in your organization.
- Ask your franchisor for help. Paul shared how McDonald's franchise owners could lose the ability to pass their business to their if they don’t meet certain qualifications. Investigate with your franchisor if they can help you in developing your successor to take over the franchise.
As a final thought, I want to rescue something that Jesse said. She pointed out how a key for succession success is gratitude. Relatives have to understand the gift that they will receive: an established, grown, and mature business. If this doesn't exist, the organization is at risk.
Hopefully, these tips will encourage you to start taking the steps to make a succession plan. It is about protecting your legacy and your family! The American Franchise Academy focuses on giving you the knowledge, tools, and resources to be successful with your franchise. Follow us on our YouTube channel and subscribe to our newsletter at the link below to access more valuable tips.
- If you weren’t around anymore, who would take over your business?
- Is that person ready to take the lead? How familiar are he/she with the business?
- What are the administrative things that you have to get ready for the succession plan?
- How sellable is your business?
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