How To Get Out Of A Franchise Agreement
How To Get Out Of A Franchise Agreement
Franchisees should always have an exit plan in place to sell their franchise. Whether they did a great job, prepared well for retirement, and are ready to retire, or they made some mistakes and need to make an exit, franchisees eventually need to return their holdings to the franchisor.
Keep reading to learn just what needs to be considered, from retirement strategies to termination fees and requirements. Having a clear plan for selling a franchise when the time comes is just as important a goal as knowing how to begin one.
Use Franchise Goals to Plan Your Exit Strategy
Every new business venture requires short- and long-term goals. Launching a franchise is no different. Setting clear goals for your new franchise endeavor is vital to achieving success.
One example of a strong goal turned exit strategy is to open a complementary franchise. This is a clear goal that any franchisee can set for themselves and can ultimately provide the freedom to exit other franchise agreements, if the need arises.
Franchisees can reduce risk when sudden changes or unexpected events occur by having a clear franchise exit strategy included in their goals from the beginning. While it may seem strange to consider how to exit a franchise before it has even begun, having a plan for leaving a franchise is a necessary long-term goal in the event of sudden changes or unexpected events.
Remember Your Clause for Termination and Exiting in The FDD
The key to a smooth beginning (and end) to a franchise agreement starts with the Franchise Disclosure Document. You can find a detailed article on all the points to remember when drafting your FDD below.
Take note, having clear guidelines for selling a franchise or terminating a franchise agreement are key components of the franchise disclosure document. Be sure to consider all possibilities or reasons for franchise termination down the road.
Perhaps you have had wild success in your franchise endeavor and wish to retire. Retirement for the self-employed can seem complicated in comparison to retiring from a conventional employer.
Don’t make the mistake of waiting until the last minute to understand just how your retirement plan as a franchisee will look.
Thankfully, there are many tools and plenty of information available to ensure that you have a clear plan of exit should you find yourself at that blissful crossroads – ready to hang up your hat for good and reap the benefits of all your hard work.
Unfortunately, you may not be quite ready for retirement, but things do not always go exactly to plan. Perhaps you hit a few more struggles in building your franchise than you initially anticipated – anything from sudden market changes to personal tragedy could mean that a franchisee needs to make a smooth exit from their franchise agreement and take time to reevaluate. Termination is always possible, so know your options and all things to consider when terminating a franchise agreement.
Franchise Exit Fees & Requirements
Of course, the franchisor may have some franchise exit costs, should you choose to terminate the franchise agreement unexpectedly. At the beginning of the agreement, make sure to know all charges that may occur when deciding to terminate a franchise agreement. There will undoubtedly be some fees involved, however there are other details to consider. Will these fees have to be paid all at once? Perhaps there are other items such as intellectual property or shareholdings that need to be finalized in the termination plan as well. Be sure to know every detail of the requirements for exiting the franchise agreement to avoid unexpected costs.
Leaving a Franchise: What’s Next?
So, armed with the right information and documentation you’re ready to begin the process of selling a franchise and terminating a franchise agreement. Now what? Your next move is entirely up to you. Assuming everything went well and your earnings have been plenty, perhaps you are ready to retire. Then again, there could be more work to be done.
During your time as a franchisee consider the new connections you have made and business savvy you’ve earned through experience. Franchisees can develop many wonderful business relationships from every aspect of owning a franchise. Perhaps you made some solid connections within a franchise organization, your complimentary franchise, or even with vendors or clients with whom you’ve traded services and products.
Whatever new tools you possess, now is the time to utilize your new business network and plan your next steps for success. Take your time, discuss plans with family and friends and soon you will have an idea of the next business adventure you wish to embark on.
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