Credit as last resort

Where principals wish to motivate franchisees or agents to build up a capital value. In their businesses and to encourage, or facilitate their exit planning, they could provide a BOLR facility. A BOLR facility is an undertaking by the principal to purchase a business from a franchisee at a certain price, subject to certain conditions. We will now examine briefly how this might apply.Credit as last resort

Usually the BOLR facility will only come into play. If the agent has gone through the exit planning steps laid down in the agency agreement to transfer his business and has failed to do so.

BOLR facility

The BOLR facility is not meant to be a full substitute for a successfully planned exit. The idea is that it is a last resort disposal and the price paid reflects this fact. For example, in businesses with few hard assets, the principal could apply a valuation formula to arrive at a purchase price. At a discount of, say, 30% to true market value or, where there is a large asset content in the business, the principal could set the BOLR price at a figure that reflects the market value of net tangible assets only.

The BOLR facility is found only amongst the more enlightened franchise and agency groups. In these groups it has proved to be a highly successful way of underpinning. The value of the franchise to franchisees, as well as an effective way of motivating franchisee and agency growth.

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