Resale Initiative Caters to Both New and Retiring Franchisees
Planning a successful exit strategy might not be the primary consideration for a newly minted franchise owner. In the early days, the franchisee might be more focused on building and growing a successful business. But having access to a dedicated program facilitating franchise resales can provide peace of mind for the franchisee and a structured way to plan for the future.
A formal franchise resale program also streamlines the process for prospective franchisees seeking to invest in established and successful businesses, and offers opportunities for existing franchise owners looking to expand their portfolios, says Keri McGuire, senior franchise development director for WellBiz Brands.
While most franchise brands have no formal team or department dedicated to franchise resales, WellBiz Brands identified the need and created one. “With a portfolio of almost 1,000 locations including established wellness brands dating back to 1996 and the early 2000s, WellBiz Brands saw the need to establish a formal resale program to provide specialized support for legacy franchise owners who have been in the system 10-20 years and are looking to exit the franchise system through resales,” says Rachael Larson, resales manager for WellBiz Brands.
A franchise resales program also helps “keep a franchise system healthy,” McGuire says. “When an owner is ready to retire or move on to new projects, it’s a win-win when the resale specialists can help support and facilitate that process by bringing in new owners who are excited to hit the ground running. Having these resources in place also serves as a closure mitigation strategy, which protects enterprise value at the company.”
WellBiz Brands’ Franchise Resales Program
Support and resources provided by the resale team include guiding franchisees in their approach to valuation, distributing information on available resales to different consultant networks, and managing inbound leads from a resale-specific website, Larson says. WellBiz Brands also spends its own digital marketing dollars to promote resale efforts, specifically targeting buyers looking to purchase secondary market assets, she says.
Once candidates are initially qualified, they are asked to sign a non-disclosure agreement and scheduled for a more in-depth discussion with the senior director of resales. Prospective buyers then have the opportunity to review financial statements and other details, and be introduced to franchise owners.
“WellBiz Brands recognizes that support for new development is quite different than that needed for a resale, and it has invested in a human capital infrastructure to support the new transfer owner through dedicated operational support,” McGuire says. “WellBiz Brands is able to further optimize the resale opportunity by supporting the ramp-up of a new franchisee that has acquired an established location, but is new to the franchise system.”
Advantages of Investing in a Franchise Resale
The benefits of purchasing a franchise resale include:
- A financial track record, enabling a buyer to forecast revenue more accurately.
- An existing customer base, workforce and supplier network.
- Existing real estate with infrastructure already built out.
- Often a trained and experienced staff.
- Established cash flow.
McGuire points out that with a WellBiz Brands resale, immediate cash flow includes membership fees collected from an existing customer base. “The brands in the WellBiz Brands portfolio are recurring revenue/membership models, which makes that revenue even more predictable, minimizing the risk of the initial investment into the franchise venture.”
In addition to robust demand for resale opportunities, the personal services vertical continues to show growing consumer demand and potential for growth. The 2023 growth is estimated to have been 3.2% and 2024 is projected to be at 3%, consistently the highest rate of all business lines in the 2024 Franchising Economic Outlook published by FRANdata, McGuire says.
Investment Opportunities through Resales
The WellBiz Brands resales program also enables franchisees to continue growing their franchise footprint by acquiring additional units from within the beauty and wellness-focused portfolio. Franchisees have been able to grow incrementally with their existing brand, but also have the opportunity to acquire other brands across the portfolio that share a similar customer base, as well as franchisor-supported infrastructure, McGuire says.
In addition to single-unit resales, WellBiz Brands has had success in bundling new franchise development with resale opportunities. “As an example, our largest deal in the history of Elements Massage was for 14 new units combined with eight resale locations,” McGuire says.
“A sophisticated buyer who is an existing franchisee in the QSR space along with other business ventures was looking to diversify into the wellness space, but only had an appetite for joining a system where there was a combination of both resales and new development,” she says. “The team came together and made it happen, and the consultant that brought the right candidate to us earned close to $200,000 on the deal!” For more information, visit https://wellbizbrands.com/.
