Canadian Franchise

Succession planning in a franchise system

Leaders of a growing franchise are by necessity, intently focused on the day-to-day growth of the business. Unfortunately, that means an important issue like succession planning often takes a back seat. While 50 percent of business owners plan to retire in the next 10 years, two-thirds of them haven’t developed a succession plan.  A newer trend is people leaving the workforce to invest in a franchise with the anticipation they will pass it on to their children. Recent numbers suggest a high number of franchises won’t survive the retirement of the original owner without a succession plan in place.  

Even people who don’t anticipate anything bad will happen to them still plan for the unexpected by preparing a will, yet franchisees don’t make similar preparations when it comes to their businesses.  And franchisors rarely plan for such unexpected events, either.  For business leaders, leadership succession is one of those issues that never seems critical until it suddenly is. But the reality is that when you engage in succession planning, you’re actually preparing to take your business to the next level.

As the demographics of the franchisee population change, franchisors will likely struggle to fill the gaps as retirement looms within the Canadian marketplace.  The COVID-19 pandemic accelerated many of those retirement plans.  Whether you’re a baby boomer still leading the company or a Gen Xer starting your journey into entrepreneurship, thinking about that transition—planned and unplanned—is critical work that you need to do before you have to do it.

During the start-up phase of the franchise, a business plan helps to layout organizational structure, establish management roles, and produce financial projections.  This is a key undertaking in the succession process as well.  Creating a management plan that evolves over the life of the business may help to make the transition to retirement less stressful.  Both franchisees and franchisors should identify the following when creating a sound management plan:

A Sound Management Plan
Succession planning isn’t just about the distant future; it’s about preparing for your franchises growth and long-term viability. When you start along the path of succession planning, you find yourself asking such questions as:

  • Who in the business has strong relationships with your customers?
  • Where is innovation happening in the organization, and who is leading that charge?
  • Are there people within the organization who are prepared to take over the business?
  • Are there family members who can be groomed for the role?

​These are just some of the questions that can help franchisees to determine whether your business is primed for growth and who you can engage in that work. These questions also provide insight to the vulnerabilities that exist in your operation. For example, you don’t want your head mechanic or salesperson to be the only ones who have relationships with your customers. You want to make sure each customer is established within your organization through multiple points of contact so that employee transitions of any type do not affect client relationships. 

Falling back on the old franchising adage; you’re in business for yourself, not by yourself, you can leverage the experiences of all the franchisees before you to help in the succession planning process.  Speak to those who have recently left the system as they may provide guidance on who might be a resource, timelines, and insight on how you may be supported by the franchisor.

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