During this edition of our Thriving through Covid blog series, we’re going to explore the subject of franchise resales, one of three ways in which entrepreneurs can punch a ticket and become their own boss. The one key advantage of a franchise resale is that you’re purchasing an existing and established business, thereby avoiding the startup phase—often the most difficult period. If the sale is an attractive offer, you’ll likely assume the existing customer base, positive cash flow, and possibly even the staff (your choice, though!)
In a franchise resale, provided you begin on the right foot, the existing owner should be more than happy to walk you through the many facets of his or her operation. Everything from systems and processes to vendors and reputation management. It’s the best of two worlds—instant cash flow and critical assistance.
As with any type of a resale opportunity, you’ll want to put in your fair share of due diligence. After all, you wouldn’t buy a used car without test driving it or having a mechanic look it over—and a franchise resale should be approached no differently. A key question you’ll want to ask is this—why is the current owner operator selling the franchise? Finally retiring after 30 years spent building the business into a profitable enterprise? Good. Selling to get out from under a looming business collapse? Bad.
Keep in mind that a franchise resale is also different than buying an existing non-franchised business. You aren’t buying a resale operation to assume ownership on your terms—you must still work within the confines and operating guidelines of the franchisor. And that goes for the territory, as well. You’ll need to know exactly what your rights are, in order to stay in compliance.
When franchise resales go right, you may have a lot to look forward to as the new owner. Your business will already be up, running, and hopefully successful. You may also be purchasing a well-known brand among your local customer base—loyalty counts! Cash flow is present and if you choose to retain the existing staff, you can be in business without the operation skipping a beat. Even financing may be easier to obtain, based on a good track record of past performance for the franchise.
Now, back to your due diligence. Don’t let emotions overrun your common sense. No matter what you think you’re walking into, you’ll need to know specifics as it pertains to the books. The seller may already have conducted a business valuation, but have this independently checked to make sure all the numbers add up. With accurate bookkeeping and records, you should have no problems creating benchmark profitability projections. Involving legal counsel is not just strongly suggested, it’s highly recommended. If there are any pending lawsuits, liens or other legal action, you’ll want to know about it.
Lastly, if attainable, you’ll hopefully have the opportunity to continue a relationship with the previous owner. If terms and the deal are amicable, it shouldn’t be a problem. Even though with franchising, you get the support of other franchisees in the system, it’s likely nobody knows the business as well as the former proprietor. If you can stay on friendly terms, it might go a long way towards ensuring a smooth ownership transition, as well as managing any headwinds down the road a bit.
Franchise resales are nothing new to FranNet and their team of qualified consultants. You can find one in the area where you live and work. Let the franchise sales experts help you navigate a course for business ownership through franchising—whether new or used!
“Thriving through Covid” is FranNet’s new series of inspirational articles featuring positive news, business owner profiles, success stories, and educational updates—all of which demonstrate the resilience of the franchising industry. We want you to know that even during this uncertain time, franchising can offer you an alternative path forward—and a new opportunity to achieve success through business ownership.
Check back with FranNet twice weekly for new articles and let us know when you’d like to begin an entrepreneurial journey of your own!