Franchising with a Family: 8 Steps Every Franchise Owner Should Take for their Loved Ones

from David Wimer, Founder and Managing Principal, David Wimer Advisors, LLC.

No one likes to think about the jeopardy that sudden and unpredictable crisis can place on your business, finances and family. We know firsthand that as franchise owner/operators you must.

When you are a franchise owner, there are some unique complexities for your spouse and heirs. Your business (and family) relies on terms of a license agreement, which must be addressed in the event of a business transition. A large part of our practice is working with the franchise owner, their family members and spouses to protect from the negative financial effects of sudden, unpredictable events. In our work we have identified eight steps every franchise owner should take to protect their family, in the event you are absent and they should need to confront that unplanned crisis.

1. Minimize family liability exposure.

While you may need to be personally liable for some or all of your business debt, do everything in your power to keep family members from becoming personally liable, too. We recommend:

  • Make every attempt to avoid having your personal guarantees convey to your spouse or other family members. Your attorney can help you here.
  • Carry life and disability insurance sufficient to cover all personal guarantees and at least 2 years of your income.

2. Have a family or estate attorney.

You need to have an attorney whose sole responsibility is to look out for your family in a crisis. For instance, a business attorney will have primary responsibility to look out for the business.
There is always the possibility of conflicts of interest. A family or estate attorney may be better suited to address both family members and business matters and how each would be affected by sudden crisis. An attorney with knowledge of franchise law may also be of use if the crisis is one which affects the licensing rights of heirs and spouses.

3. Know your Franchise Licensing Terms. Consult with your attorney to see what occurs in death, divorce or disability.

We have reviewed many Franchise Licenses for leading brands of hotels, fast food restaurants, automotive repair and business services. We have seen wide variations in terms of transferability, depending upon the brand. It is extremely important that your family know precisely – if this happens, what happens next.

Seasoned owner/operators also know how the Franchisor has behaved in times of crisis. Your local or regional franchise coop may be able to share how certain situations have been handled in the past, so that you know what you/ your family can expect in a crisis. Your Franchise License may also require certain owner/operator or legal responses depending upon the situation. Topics may include transferability and rights of information or privacy. Our point here is: The Franchisor is a critical party to be included in your family’s decision-making. We find that open communication in times of crisis is essential to any successful business transition.

4. Create a Business Protection Pack

You should maintain separate copies of:

  • All legal business documents
  • All monthly, quarterly, and annual financial statements
  • All tax returns
  • Bank statements
  • Employment contracts for key employees
  • Your succession plan (i.e., who you want to manage the operations of your business if you are no longer there)
  • Contracts with key vendors
  • Contracts with key customers
  • Insurance coverage: health, life, disability or long-term care
  • Computer passwords, bank passwords, safe combinations

These documents should be kept up-to-date regularly and in a safe deposit box at a local bank where your spouse/heir and your family attorney can have immediate access.

5. Share the existence of the Business Protection Pack with your personal financial planner.

The importance here is easy access and insight from a key family professional that is providing advice to your family/heirs. Critical documents such as are outlined above are essential to seeing the big picture. Many financial planning brokers provide cloud storage as a value-added service. For instance, we know Ameriprise® offers a free, easy-to-use cloud service for its client investors.

6. Include your intentions for your business assets in your Will.

Your Will should specify not only who gets what with respect to ownership in the business, it also needs to spell out what responsibilities each heir may or may not have.

7. Keep your spouse informed.

Real problems tend to occur when a franchise owner dies or becomes disabled. Generally we find 85% of the franchise owner’s wealth assets are tied up (illiquid) in the business. Most importantly, the business generates 100% of the family cash flow. Your spouse (or other primary heir) has a need-to-know on a regular basis, how the business is performing in the event of a crisis. Difficult times require informed decisions, and having business context for making the right decision is critical. If you keep it all to yourself, surviving the crisis without your insight may be impossible.

Consider inviting your spouse to regularly attend a quarterly or annual financial meeting to listen, so that they know what is happening. Your spouse needs to preserve assets and protect your family in event of your unplanned absence. Allow your spouse to get to know your senior management, business attorney, CPA, and any other key business advisor’s you may have. If something happens to you, your spouse will have to rely on these people to work through the business transition. Those relationships do not have to start from scratch.

8. Put a Power of Attorney in place.

The PoA needs to make clear what role your spouse or other heir(s) will have with regard to the business. This PoA, or a separate one, also needs to discuss the handling of any medical issues requiring the input of others. Again, your Estate Planning Attorney is best at having these types of documents developed that fit your family business situation. While you, as a franchise owner, cannot totally insulate your family from the impact of a business crisis, we believe you owe it to your family to take what steps you can. Our experience has shown that well over half of the serious business problems related to death, disability or divorce that we deal with regularly would have been avoided if the franchise owner/operator had just taken the time to put these recommendations in place.


Davis WimerDavid Wimer is Founder and Managing Principal of David Wimer Advisors, LLC where he works with privately-held, family businesses to navigate business transitions and prevent financial crisis. He is the author of INSIGHT: Business Advice in an Age of Complexity.

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