BE PREPARED – RETIREMENT AND SUCCESSION

Stacy Swift—Moderator FranNet Darcy Masciotro and Amie Fuller H&R Block Leslie Hackett and Harvey Homsey Express Employment Professionals Liz Dillon Gray Plant Mooty

AGENDA

Creating a plan for yourself and your business Key steps in the transfer of a franchise business Bringing in the next generation Business planning to avoid costly estate taxes Lessons and insights from senior executives

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DARCY MASCIOTRO & AMIE FULLER H&R BLOCK

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WHAT IS SUCCESSION PLANNING • A documented road map for partners,

heirs and successors to follow to ensure a seamless transition throughout the life cycle stages of your business

• Form of risk management and business continuity

• Your long term business plan

WHY IS IT IMPORTANT? Minimize the loss of productivity during the transition Ease of exiting when you want and on your terms Get the highest value for your business

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What are the options to sell (transfer) your franchise?

TRANSFER OPTIONS

Franchisor evaluates and

approves

Introduces more buyers

into the market

1. Franchise to franchise sale 2. Second generation or key employee

transfer

3. Company acquisition 4. Sale to a converting ERO in the area 5. Sale to a new prospect

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Help you create/organize your succession plan via the Business Planning Tool Assist with finding a buyer Help in evaluating the buyer Consider right of first refusal

Gain alignment early on between franchisee and franchisor on your buyer

Franchisor is increasing its support and involvement in succession planning

FRANCHISOR SUPPORT

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LESLIE HACKETT & HARVEY HOMSEY EXPRESS EMPLOYMENT PROFESSIONALS

Passive Income Bench Partner

Transfer Family Partner

Cash Sale

What do I want? Exit Strategy

CREATING A PERSONAL PLAN

• Junior partner

Building the bench

• Cash for reinvestment/retirement

Sale

CREATING A PLAN

• Know your time investment and goals • Start looking for a buyer/succession

plan day one • Upgrading the business talent • Be prepared to stay long as needed • Sell to your clients as though it’s always

yours

A Franchisor Perspective…

KEY STEPS IN THE TRANSFER

Franchisee Perspective

• What type exit strategy? • Timing • Who is the buyer? • Franchisor vetting? • Use Key resources

– Franchise agreement – Legal – Accounting – Franchisor

Franchisor Perspective

• Know the assets that are and are NOT the Franchisee’s

• Be legal: – Have a buy sell – Follow your franchise

agreement

• A buyer that’s a good fit • Assistance with the sale and

identification of a buyer • Pricing guidance

Franchisee

• Upon death, sold and placed in trust

• Passive income until that point

• Sale dollars to be reinvested

Franchisor

• Family members are not always an option

BUSINESS PLANNING TO AVOID COSTLY ESTATE TAXES

LESSONS AND INSIGHTS

Senior Executive considerations…

• Not all buyers fit • Know what’s required for success;

replacing “bad” with “bad” won’t fix • Family members don’t always know the

business • Have a recovery plan • Re-purchase is not an option

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LIZ DILLON GRAY PLANT MOOTY

LEGAL CONSIDERATIONS

• Prepare your Business for Sale • Transfer to Family Member • Transfer to Another Owner • Transfer to a Third Party • Prepare for Unplanned Transfers • Franchise Agreement Obligations

PREPARE YOUR BUSINESS FOR SALE

• Assemble your team (investment advisor, attorneys, CPAs, lenders, insurance agents, appraisers)

• Identify your goals (sale, transition to family members, timing, liquidity needs)

• Identify timing (3-5 years before sale)

TRANSFER TO FAMILY MEMBER Only 30% of family businesses survive a transition to the second generation, and only 12% to a third.

TRANSFER TO FAMILY MEMBER

• Leverage gifts • Use LLCs to centralize management of

the business and increase transfer value

• Use of trusts • Impact of the transfer on other family

members and yourself

TRANSFER TO OTHER OWNERS • Buy-Sell agreement • Is it realistic? • Is the valuation current?

TRANSFER TO THIRD PARTIES • Unique purchase agreement

requirements when transferring a franchised business

• Valuation - set realistic expectations • Tax planning

PREPARE FOR UNPLANNED TRANSFERS

• Update estate plan • Current buy-sell agreement • Use of insurance policies • Role of fiduciaries • Tax Planning

OBLIGATIONS UNDER FRANCHISE AGREEMENT

• Understand your obligations • Right of first refusal • Communicate with the franchisor • Get pre-approval of potential

transferee • Assignment and consent agreement • Transfer fee • Assignment upon death or disability