Want to create a lasting legacy that can be passed on to your children? When you first think of buying a franchise business that may not be your initial goal, but a franchise is a great way to give your children (or spouse) a valuable and sustainable income source. It’s never too early to plan for the future, and there is no better lasting legacy than a business that can provide for your family. Creating a potential career path for your children shouldn’t be your only motivation for buying a franchise, but it’s certainly a major positive. What’s more, the way a franchise is typically set up—most franchisee contracts are 10-year agreements—makes them easier to pass on than a traditional business. In addition, you have the peace of mind knowing that your family will have the support of the franchisor to keep the business on track and profitable. They aren’t alone in running the business even when you’re not there.
If you are thinking of becoming a franchise owner, you should at least entertain the thought of passing on your business to your spouse, son or daughter. Discussing it with them is a good start, but much more is required. Start by consulting a CPA, as well as an estate planning attorney. They will be able to walk you through the intricacies of the process to ensure that your loved ones don’t have to sell the franchise off just to handle the estate taxes. Also, did you know that most franchise agreements state that the franchise owner has to approve his or her successor? Without that in writing, there are no guarantees your business will be passed on in the way you wanted. Additionally, different franchise systems have different rules for onboarding new owners.
Align Your Stakeholders
When you are considering buying a franchise, your main goal is probably to create a means of building wealth that would provide a comfortable lifestyle for you and your family. But it is never too early to start thinking about your business’s legacy and passing on that opportunity. Even in the beginning of your franchise buying process, there is no downside to starting to consider who will take over when you retire. The decision will be easy if you have only one child that is passionate about the opportunity. Issues may arise, however, if you have multiple children, especially if more than one of them is interested in carrying on the business. Again, this is where having a succession plan that is created in connection with the franchisor and legal experts can help you ensure that everyone is happy and cared for when you decide to walk away from the business.
Create a Job Description for Your Successor
Should you move forward with the purchase of a franchise, there are two things that will need to happen to kick off any succession planning process: First, you need to determine what qualities your successor should possess to continue to run the franchise successfully; and second, you need the input and buy-in of the franchisor as to what they demand of anyone starting a franchise.
Identify Your Successor
The next step is the truly challenging part—taking the list of skills and experience you compiled, which you think your successor should possess, and comparing that with your potential list of successors. Legacy planning as a franchise owner doesn’t necessarily mean passing the franchise on to a son or daughter, you may have a devoted employee who is more appropriate. You have to determine who is the best fit and who has the interest to continue the business successfully.
Train Your Successor Now
A prime example of why succession planning is something you don’t want to leave until the last moment is the fact that your chosen successor will need time to be trained. Even if the employee or your child has been working in the business for years, there are aspects of being the franchise owner that they will not be aware of or have experience with. In addition, the franchise system may have required training that your successor must complete, the same as if your successor had decided to buy a franchise business on his own. Ideally, the handoff of responsibility should be a gradual process to give your successor time to learn and you time to adjust to relinquishing control.
Consider A Franchise That Helps With Resales
Finally considering a succession plan even before you purchase a franchise business is important because selling a franchise is not something that happens overnight. If you opt for this route, expect to invest several years in finding an appropriate buyer, and, of course, the franchisor will have the final say in who you can sell the franchise to. Several franchise systems offer resale services, which will help if your legacy planning centers on leaving cash to your family instead of passing on the actual business. Whether this is the case with your franchisor or not, involving them from the beginning is essential.
Ideally, you will have been planning your exit strategy from your franchise since the day you first considered buying into the business to ensure a smooth transition for everyone involved. But even if that isn’t the case, it is never too late to decide if your business will be passed on to your children (or a valued employee) or sold to a franchisor-approved new owner.
Thinking about your own demise is never easy but the fact is that you will inevitably leave this earth and your loved ones behind. Buying a franchise gives you the peace of mind of knowing that your family will not suffer financially upon your passing. The decision to invest in a franchise means that you will be in business for yourself but never by yourself, and this support will extend to your successors as well.
Find your franchise today and begin building your financial future.