Only buy what fits your endgame

Hi, readers!

Today we’re talking long-term plans. Is ownership your end goal? Or is it a stepping stone to something bigger?

Because your long-term plans should dictate which business you buy. 

A business that fits your plans can make your journey hugely easier, and may even have built-in incentives. The wrong one could leave you stuck in a business you hate… for years.

So let’s take a look at the 3 main outcomes of franchise ownership, and what sort of business to buy for each.

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Some people buy a business with a dream of running it day-to-day. 

There’s nothing wrong with that — but I encourage the people I help to buy franchises to look at three possible scenarios: 

• Exit

• Executive Ownership (i.e. arm’s-length ownership)

• Empire

I call these the “triple option.” It’s a football term for when the quarterback keeps the ball and decides what to do mid-play instead of drawing everything out beforehand.

Now, you probably have one of these outcomes in mind. 

But the best buys leave you the triple option — where once you’re in, you can do any of the above.

Let’s take a look at each “E” and the green flags you should keep your eyes out for.

So you want to… Exit

A lot of people ignore the exitability conversation. But it’s a mistake. 

It’s a good way to learn a hard lesson: it’s a lot easier to get into a business than to get out of it. 

So if you buy into a business or franchise and realize you hate it, you’re going to wish you’d considered exitability.

So what makes for easier exits? Look for…

• Rapid growth

The faster a franchise brand is growing, the better. There will likely be another buyer when business is booming.

• Close proximity to other franchises

Sometimes people view this as a negative. They look and say, well, I'm interested in buying a franchise in my town, but all of the towns around me are taken, so I don't have any opportunity to grow. 

And yes, your opportunity for new territory is limited. But it works to your benefit as a seller, because there’s a built-in group of buyers if you decide to sell.

So you want… Executive Ownership

What I mean by this is: can you put a manager in to run this business for you?

In my opinion, as far as franchising is concerned, you should only be getting into businesses with a path to executive ownership. 

While you’ll still be involved in some capacity, you need an off-ramp from the day-to-day operations of that business. 

What are good signs for executive ownership?

• Established, scalable systems

Avoid franchises that put a lot of “figuring it out” on the owner’s plate. 

• Strong unit economics

If a franchise doesn’t generate enough profit to pay a manager and provide a solid return for you as the owner, it’s not a good fit for executive ownership.

So you want… Empire

In this picture, your goal is to scale like crazy and expand as much as you can. You’re opening new units and buying existing ones. 

You might grow horizontally (buying more of the same units in a wider geographical area) or vertically (buying businesses that serve each other, like a restaurant, a food supplier, and a kitchen equipment business). 

If this is your goal, look for:

• Unit availability

Some franchises are hot commodities. If acquisition is your goal, you’ll need to make sure there are units to acquire. What’s more, if valuations go up, it’s a great thing for you as an owner but less good for you as an acquirer.

• Empire-friendly franchisors

Some brands prefer a diverse mix of independent operators, and limit the number of units one franchisee can own. Others actively encourage multi-unit ownership, providing incentives and infrastructure to support it.

At the end of the day, the franchise you buy needs to support your long-term vision.

It’s why the selection process is so important — and why I work with hundreds of different brands, so I can find the people I work with a good fit.

Until next time,

Connor

P.S. I’ll be writing plenty more on franchise selection in future newsletters. But if you’re ready to go today, hop over here and book a call!

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