Franchise Ownership and Your Financial Legacy
When opening a business or taking a first step to become an entrepreneur, it is obvious that you will want to create a lasting legacy which can be passed on to your children and upcoming generation of your family. Franchising, being a valuable and sustainable income source, it can be a great way of securing the future of your children and spouse. Needless to say, it’s never too early to plan for the future and there is no better lasting legacy than a business-like franchising that can provide for your family. Creating a potential career path for your children must not be you’re the sole 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 set up. Besides that, you will be contented knowing that your family will have the support of the franchisor to keep the business on track and profitable. They are not alone in operating the business even when you’re not there.
If you are deliberating upon becoming a franchise owner, you should at least entertain the thought of passing on your business to your family members like your spouse, son or daughter. Discussing it with them is a good start, but much more is required. You can start by consulting a CPA, as well as an estate planning attorney. They will be able to walk you through the details of the process ensuring that your loved ones don’t have to sell the franchise off just to handle the estate taxes. Also, you might 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 desired. Besides that, different franchise systems have different rules for onboarding new owners.
Align Your Stakeholders
When considering to buy a franchise, your primary goal is may be 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 mulling over your business’s legacy and passing on that opportunity. Even in the very beginning of your franchise buying process, there is no stumbling block to start considering who will take over when you retire. The decision won’t be tough if you have only one child that is passionate about the opportunity. However, issues may arise, 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 to make sure that everyone is happy, contented and cared for when you decide to walk away from the business.
Create a Job Description for Your Successor
When 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: To begin with, you need to determine what qualities your successor should possess to continue to run the franchise successfully; and secondly, 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 competencies, skill-sets 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 your children, you may have a devoted employee who is more appropriate. You have to determine who the right fit is and who has what it takes to continue the business successfully.
Train Your Successor Now
An apt instance 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 well-informed with or have experience with. Also, the franchise system may have needed 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 renouncing control.
Consider A Franchise That Helps with Re-sales
Finally, considering a succession plan even before you purchase a franchise business is vital because selling a franchise is not something that happens overnight. If you pitch on 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 inevitable.
Ideally, you will have been planning your exit strategy from your franchise since the day you first considered buying into the business in order to ensure a smooth transition for everyone involved in it. 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 potential/ valued employee or sold to a franchisor-approved new owner.
Thinking about your own demise is always stranger and difficulty however the fact is that you will inevitably leave this earth and your loved ones behind. Buying a franchise gives you the satisfaction 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 be alone, and this support will extend to your successors as well.
For any queries, feel free to contact Franchise Insider.
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