The Sell Or Grow Conundrum: Start By Asking The Right Questions

The continued growth of the franchise industry along with the growing gap in qualified talent are increasing the complexities of an already complex business. With this comes a lot of questions for multi-unit franchise owners on how to remain competitive, profitable, and knowing their options in terms of succession – sell or grow? Both options require planning and preparation to position the business to either sell for the highest dollar or position the leadership, management, and culture to grow and succeed through the next generation. As you are debating the sell or grow conundrum, start by asking the following questions:

• What does the current and future market situation look like?
• What growth am I most drawn to, single brand/concept or different brands and concepts?
• What does the business look like if I want to grow, but step out of day to day?
• What does life after the sale look like (for the owner, spouse, next generation)?
• How do I preserve harmony and protect business success for family and employees?

The list above only scratches the surface of key questions that must be answered in considering the future options for your business. Whether you are looking to grow or exit, a strong bench of talent is critical for managing the growth or for building value to sell for the highest dollar. If you have the people and strong relationships with franchisors, then the transaction process can be the easy part. The hard part is how to effectively integrate the above questions into your strategy.

To dig deeper in this complex conundrum, Renay Winston, president of People Management Solutions, who specializes in human resources shares that an important area of focus is getting HR involved early enough in your strategy. Specifically, he says that there are many key decisions regarding identifying key employees, compensation, benefits, retention strategies and other issues that can impact the integration plan.

Winston works with franchise owners and often sees one key area getting overlooked - understanding the cultural differences between two different organizations. Culture should be placed at the center of integration strategies and creation of a positive atmosphere of change should be done before initiating any consolidation of people and processes. Companies can minimize the people upheaval by considering the impact of cultural factors and putting steps into place at the beginning to align organizational cultures and values. Engage your HR team, or an HR consultant to help identify and minimize risks and reduce wasted time. If your goal is to grow through acquisition this is essential to minimize culture shock and drive performance. In the event you are looking to sell off units or sell completely, addressing culture shock ensures the best transition for your once loyal employees and their families.

Jeff Bannon, a partner with The Rawls Group, says whether the decision is to sell or grow, profits are critical to the long-term plan, and believe it or not, succession planning is all about predictability of ongoing profits.

Bannon says any organization relying too heavily on a single operator is limited in its ability to command top dollar on the open market or grow effectively. Structuring the management of the business with a focus on teamwork is a value driver because there is a higher degree of confidence in the ability to continue profitably under different ownership. Bannon sees many owners frozen by the keep or sell conundrum, resulting in a lack of planning which ultimately limits their options. Succession, whether it is a sale to new ownership or transfer to family members, begins with a focus on profitability today and leads to a plan to secure profitability in the future. This process creates and sustains business value.

Even if you are not engaged in succession planning, you need to pay attention to the key questions and common potholes above. If not, it will create risk and exposure, expand costs, and prevent your stores from running as efficient as possible.

As a multi-unit franchisee considering selling or growing as part of your succession strategy, take time to think about and discuss with a trusted advisor the potential, possible, and probable contingencies impacting your long-term vision.

 Renay Winston is the president of People Management Solutions, an HR consulting firm - renay.winston@people-1.net. Jeff Bannon is a partner with The Rawls Group, a business succession planning firm – jeffbannon@rawlsgroup.com

Kendall Rawls knows and understands the challenges that impact the success of an entrepreneurial owned business. Her unique perspective comes not only from her educational background; but, more importantly, from her experience as a second-generation family member employee of The Rawls Group - Business Succession Planners. For more information, visit www.rawlsgroup.com or email info@rawlsgroup.com.