April 5, 2018

An unplanned exit, whether it is due to incapacitation, death or something else, could generate significant consequences for a business. It is extremely important to have a succession plan in place for every type of business, but franchisees must have them as well. It is a win-win situation when a franchiser requires or suggests that a franchisee put a succession plan in place. 

The succession plan doesn’t have to require a great deal of complication, but it will simply outline what happens if the owner leaves by death or otherwise. A planned exit is extremely beneficial to the business because it can lead to minimal disruptions in the company if there is a sudden and unplanned exit. The succession plan may be coordinated along with an estate plan which considers transfers through sale or other means.

This disposition can happen by using buy/sell agreements, family partnerships, life insurance policies, will and trusts, and more. These issues must be coordinated with regard to any restrictions that could exist under a franchise agreement related to the disposition or the sale. Furthermore, the state laws in your individual location can have an important impact on the outcome of the sale.