One of the most highly anticipated portions of the IFA Annual Convention each year is the case study workshop conducted at the Annual Leadership Conference.  All 350 attendees are provided a real-world scenario based on an actual franchise system’s experience and work together with their tablemates to consider leadership strategies, exercise decision-tree techniques, and collaborate to “solve” the business issue at hand.  The audience also spends some time trying to guess the name of the franchise system which is kept secret until the very end!  I was fortunate to facilitate a roundtable at this year’s ALC to determine what we thought was the best exit strategy for the franchise system founder under the fact pattern:

  1. Private Equity;
  2. Remain on as a Founder with the Management Team;
  3. Merge with a Large Competitor or Platform Company for Shared Services; or
  4. Sell to an Internal Candidate.  

The group spent the next hour discussing the pros and cons of each option. While the majority of the audience ultimately chose “Private Equity” the actual franchise system co-founder and former CEO, Shannon Wilburn of Just Between Friends – went with option 4.  The big reveal and the ultimate decision was a surprise to many in the audience who had not heard the Just Between Friends story. Shannon and new CEO and owner, Tracy Panase, then discussed the acquisition of the Just Between Friends system by its largest franchisee.  Tracy explained that she had accomplished her goals (and more) as one of the most successful and largest Just Between Friends franchisees.  However, when she thought of the expression “When you find yourself the strongest person in the gym, it’s time to find a new gym” she realized she REALLY liked her “gym”.  Transitioning from franchisee to the franchisor of a system she grew to love so much seemed like the next logical step.   At the same time, Shannon did not want to suffer from “Founder’s Syndrome” and explained that her goal was to “not be a legend, but to leave a legacy.”  To ensure a successful transaction, both sides were committed to ensuring a well-organized transition.  The women prepared continuous “Success Statements” choosing a desired outcome and created a cadence of communication to the executive team, then staff, franchise advisory council, and franchisees. The hard work appears to have paid off already with the franchise system experiencing double digit growth in 2023.

Transactional and business attorneys are often asked to provide guidance to franchise system founders on succession planning long before an exit plan is contemplated.  It is important to remember that there are opportunities beyond private equity.  Educating your clients so they understand all of the options and discussing the pros and cons of each will ensure the highest likelihood of long-term sustainable growth for the brand.