Lessons Learned from Reselling Corporate Stores – Franchisor Inside Scoop

Confessions Of A Franchisor: Inside The Mind of Kyla Dufresne, Founder & CEO Of Foxy Box Laser & Wax Bar

This series, written by Kyla Dufresne, covers topics about franchising and running your own business. Join us for a sneak peek at what makes a successful beauty franchise!

After one of my recent posts on my LinkedIn page about reselling one of my corporate locations, several of my franchisor colleagues reached out to inquire about my experiences with corporate resales. I thought it would be beneficial to share my insights here for those franchisors considering selling their corporate stores. Over the past two years, I’ve successfully sold three corporate stores and gained valuable knowledge in the process. Here are three key lessons I’ve learned:

Don’t Overvalue Your Locations

When I listed my first store, I received some misguided advice to aim for a 6x multiplier of EBITDA. I had three fantastic candidates lined up, but once we shared the listings, they vanished. The reason? The initial asking price was too high, discouraging any negotiation attempts.

After this humbling experience, we went back to market with a much more reasonable price. Remember, your accountant and team are focused on your financial best interests, but they might not grasp that, as a franchisor, you’ll continue to benefit through royalties even after the sale. There are exactly 1043 ways to value a business, but here’s my approach: we started with a percentage of revenue plus inventory. For us, that meant 40% of revenue as the asking price, with negotiations starting from there.

Plan Your Exit Strategy Early

I should have sold two of my corporate stores much sooner. Between growing my franchise company and a baby in my belly, my corporate stores suffered from a lack of engaged leadership. Management transitions led to disgruntled staff and declining sales. It’s crucial to get ahead of this curve. Balancing franchising and corporate stores is tough. While owning corporate stores helps test the business model, once you shift focus to franchising, ensure you either have a dedicated Regional Manager (which can be costly) or plan an exit strategy to find an engaged owner before performance declines.

Consider Your Staff Members

Two of my corporate resales went to staff members who lived and breathed the brand. These individuals already knew the business, loved the brand, and were ready for the next chapter. Don’t hesitate to create opportunities for your staff to achieve their dreams. For two of my resales, I offered vendor financing for part of the asking price, ensuring the business could handle both their bank loan and vendor financing payments to set them up for success.

Remember, it’s always best to have an engaged owner in the store and the community, committed to its success. Creating opportunities for people is not only beneficial for them but also for the longevity and prosperity of the business.

These lessons have shaped my approach to reselling corporate stores, and I hope they provide valuable insights for anyone considering a similar path.