Many times before in this blog series, we’ve talked about the three main entrepreneurial paths to business ownership. You can start a business from scratch, buy an existing business, or buy a franchise. At FranNet, it’s our core belief that option number three is by far your best bet for success for business ownership. The ability to follow a proven business model, without having to reinvent the wheel, is an attractive proposition to most entrepreneurs. Not to mention the ongoing training and support that comes with franchising.
When considering the second option, buying an existing business, most people think of a mom-and-pop operation that you purchase and then take over. But it can also be a franchise—one that’s already been established and operational for some time. In franchising, a resale refers to the purchase and transfer of an existing business unit or territory that a franchise company has previously sold. In today’s blog edition, we review the advantages of considering a franchise resale opportunity:
Handing Over the Keys
What’s really great about a resale franchise? Instead of starting a franchise business completely from scratch, you’ll be purchasing one that’s already established. This means no site selection, no build-out, no new construction, no new round of inventory orders, and no employees to hire (unless you’re there to “clean house”). Not only is everything in place, but your potential for income is also present from day one of operations.
Better Deal Terms
When you buy a new franchise, all the fees and royalties are predetermined. In short, you know what you’re buying and what you’ll get for the price. But with a franchise resale, the floor is usually open for negotiated terms. And if your seller is motivated to close a deal, it can be advantageous to your bargaining power. Franchise resales offer buyers extra leverage.
If the operation is successful, you won’t need to build an audience of customers—they should already be in place. That puts your focus on retaining them, not attracting them in the first place. Having a well-known brand is an advantage of franchisors and this is one area where you can leverage it for your benefit. Whatever your crowd looks like, it’s probably better than starting from scratch.
As mentioned before, unless you’ve bought a franchise resale that needed to clean house, it’s possible to inherit and retain the existing employees. And existing employees are experienced employees that will need little training compared to a brand-new crew. In a perfect world, they may even be able to show you the ropes and help you get up to speed as their new owner.
Although there are several advantages to considering a franchise resale, it shouldn’t happen without the proper amount of due diligence during the negotiation process. It’s important to know the reason why the existing owner wants to sell. If it’s an innocuous reason like, say, retirement—that’s great. If it’s escaping multiple local lawsuits, not so much. You’ll want a detailed look at the bank records and bookkeeping to make sure that everything is still on the up-and-up. And it’s advisable to do this with a seasoned business executive, such as a CPA.
If you’re in the market for franchising and you’d like to discuss your options for purchasing an existing operation, FranNet can be of assistance. Regardless of your route to franchise ownership, we want the right fit for you. If that means buying a brand-new franchise, we can do that too. But if you’re interested in a more frugal route, with several advantages over beginning at square one, let’s set up a visit to discuss franchise resales that are available in your area.