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Buying a Franchise Resale You may not be surprised to learn that buying an existing business is usually smarter than starting from scratch. Ideally, this company already has a well-established reputation, clientele and a history from which to base your future decisions. When you consider these factors in terms of their monetary worth, buying a business that has already become flourishing just makes sense. There are exceptions to the rule, but for the most part, starting from scratch can prove to be far more stressful and even more financially straining than buying in.
Of course, you’ve probably heard all this before. What you may not have thought about up to this point, however, is a franchise resale business. With any franchise, you have certain advantages: brand name recognition, advertising and marketing campaigns, market research, training, location assistance, etc. Additionally, when you purchase a franchise resale, you may even have a less expensive business opportunity without the hassle and headache of actually opening the store.
For instance, preliminary research such as location, store design and the local market has already been discussed between the franchisor and current franchisee. You can examine the store’s financial records to determine whether the resulting franchise is a product of a well-implemented plan. A location that consistently yields a profit shows that the franchisor and franchisee are running a successful business and you may want to take advantage of this opportunity. As you think about buying a franchise resale, there are a few steps you can take to help ensure that you find a business to help you achieve your primary goal - making a profit.
Whether You Buy Depends on Why They are Selling
Many franchisees find success and are ready to sell once their financial goals have been met. After all, one of the keys to any lucrative business plan is to also have an exit strategy. Most people do not stay with the same career their whole lives and you should always strive to continue growing. Once your business peaks from a financial standpoint, it may be the right time to sell, invest and move onto bigger and better business ventures. This may be exactly why the franchisor with whom you’re about to meet is selling.
On the other hand, he or she may have decided that franchising is not as good a fit as originally anticipated. It may be profitable but personal satisfaction is just as important. Again, as long as the franchise is consistency making money, it’s worth researching. Simply begin by asking the franchise why the business is on the market. Whether it’s new career goals or even a life-changing event (death in the family, illness, etc.), where you begin should depend on how the current franchisee is ending his or her ownership.
Look at the Bigger Picture
Once you learn more about the current franchisee, take some time to research the franchise itself. Beginning with the individual store, make sure that preliminary research included investigation of the local market. The owner and franchisor should have already determined the need for their products and services in your area before choosing a location. Still, you should always make sure. In fact, it may be even wiser to conduct your own research of that particular area. Remember that existing marketability should be one of the perks when buying a franchise resale.
Another good question for the current franchisee is how many owners have managed this particular franchise in its present location. You may not have entertained the possibility of there being more than one owner but you should certainly check. You should also find out how long these ownerships lasted. As you may have guessed, too many proprietors in a short time frame should raise some red flags. It could indicate either lack of support by the franchisor or poor location. Naturally, if the business is performing well, you probably won’t encounter this scenario.
After meeting with the store owner, take the time to visit with store employees. Chances are that the idea of being under new ownership will seem threatening to many of them. They will begin to wonder if you plan to keep them on board or hire an entirely new staff. Just making time to talk with them will put their fears at ease and answer important questions like whether they plan to stay. They can also provide information about the day-to-day operations of the store. Existing employees, especially managers, will make your transition into the business much smoother.
Keep in mind that it’s in your best interest to keep employees, especially managers, because they’re already trained. They also provide reassurance for your customers with their familiar faces and established rapport. The only exception to this rule is when your store has a deteriorating reputation in its community. As you can imagine, it’s unlikely for a money-making franchise to suffer from a poor reputation.
Now that you’ve accumulated information about the franchise, it’s time to learn more about the franchisor. You already learned that your particular store is thriving and has had few owners over and extended period of time or maybe one owner over a shorter period. Other factors to consider are how many franchisees sell out company-wide each year in addition to the number of franchise agreements terminated by the franchisor. The location you’re about to buy may be so young that its history can not reveal problems with the franchisor that cause numerous turnovers within the company. Again, such conditions could indicate problems such as lack of support.
Your Avenue to Success
And finally, as you prepare to buy the resale franchise, it’s important to remember all the details that are important to any business transaction. For example, thoroughly read the franchisor’s disclosure agreement and be sure to share it with your attorney. This crucial document will provide you with a business background, including costs, restrictions, earnings potential and information about training and company advertising. Nonetheless, this is only the tip of the iceberg so it’s essential that you understand everything in the disclosure.
The concept of buying a franchise resale may be entirely new but it shouldn’t intimidate you. Like any franchise or existing business, taking the time to research your options will tell you a lot. As you lay the groundwork, you may decide to move in a totally different direction. Better now than later, of course. You may, however, learn that a franchise resale is exactly what you’ve wanted all along. A good franchise resale comes with fewer initial costs and with fewer stresses associated with building a business. It may be your avenue for the road to success in the world of business franchising.
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