People who use franchising as the route to business ownership decide to do so for many reasons. Some get fed up with Corporate America. Others want to follow their dreams and run a business of their choosing. A few get in the game to expand or diversify a business ownership portfolio. Lastly, some buy franchises to provide a family business legacy or even an exit strategy for retirement. Yet regardless of these reasons, all franchise owners share one thing in common:
They’ve purchased an asset that has an intrinsic and portable economic value.
A franchise has the potential to achieve incremental growth or, in a less desirable outcome, underperform. But regardless of the winds of financial fortune, the operation always retains a certain financial value. And a business you own is a business you can one decide day sell. As you’ll see, it’s an attractive proposition for franchise owners—and prospective franchise buyers.
A franchise resale is an option that belongs to the owner/operator. But it also includes the franchise brand’s authorization and approval (take note of this clause in any franchise operations manual). A resale is the legal sale and transfer of an existing franchise operation and/or territory that’s previously been sold.
Two of the three paths to business ownership include buying an existing standalone business or buying a franchise. Resales accomplish both—meaning you don’t have to choose between the two. The benefits of buying into a resale venture are plentiful. But before you go putting the cart before the horse, don’t enter into a resale wearing rose-colored glasses. Conducting a thorough amount of pre-sale due diligence is extremely important. Here are a couple of benefits of a franchise resale:
While every resale opportunity is different, all of them are established. You’ll need no grand opening, site selection committee, build-out, stocking of inventory, and hiring of staff. Just the same, the revenue stream should also be present, along with an existing customer base. In almost every case, the franchise up for a resale has already developed its own brand awareness.
A franchise with years of successful operation under its belt also comes with another bonus—benchmarks. When buying a concept directly from the franchisor, you’ll be provided with data and information that covers your financials from start-up to break even. But these are carefully crafted estimations. With a resale opportunity, you’ll get a much more detailed look at the financial performance of the operation. If the numbers are profitable, you already have the revenue target to meet. If it’s underperforming according to the brand’s standards, you’ll know precisely what gains you’ll need to make.
For Franchise Owners
As the owner of a successful franchise operation, you get to decide if and when a resale opportunity is right for you. Done correctly, a resale can monetize the value and wealth of your hard work, providing a decent return on your initial franchise investment. The process begins with a simple business valuation.
For Resale Buyers
As a franchisee looking to join the entrepreneurial set, a resale has the potential to set you up for instant success—without all of the hassles of starting from scratch. But you’ll want to conduct a thorough assessment of the resale opportunity and be unafraid to ask the tough questions. The process begins by investigating current franchise resales in your area that match up with your financial capabilities.
If the idea of business ownership appeals to you, don’t delay—contact us today!