The Case for Buying an Existing Franchise Business

Dec 14, 2017 | General

At FranNet, our qualified franchise consultants help guide entrepreneurs in making informed decisions about franchise purchases and future ownership. But we have some advice for you. Just as when you shop for a car, you don’t always have to buy new. In fact, an existing franchise business for sale might just suit you as well. Today, we’ll be making the case for buying an existing franchise. Here are the pros:

Ready, Set, Go

The first pro should be glaringly obvious. Instead of starting a franchise business completely from scratch, you’ll be purchasing one that’s already up and running. What this means is no site selection, no build out, no construction, no initial inventory order and no interviewing potential staffers. Everything is already in place. Best of all, no delay in making money!

Getting a Deal

With a new franchise purchase, you’ll know going in what the actual price is going to be. It’s set in stone, with little or no negotiation involved beyond the possibility of royalty payment waivers. With an existing franchise operation, everything is up for negotiation. And in all likelihood, you’ll have a motivated seller to boot. This means you can draft up favorable terms, prices and agreements when you make your pitch to buy the business. That’s resale leverage!

Built-In Customer Base

If the franchise has been a successful one—and it should be, you’ll inherit a customer base rather than building one. Your main goal will be to retain these satisfied customers while looking to expand your consumer reach in your assigned territory. That’s better than starting from scratch, right?

A Crack Staff

As the new boss of an existing franchise, you’ll also inherit a staff. Of course, what you do with them in terms of retention is solely up to you, however these employees will already be trained and seasoned in the ins and outs of the business. Staff reviews and evaluations are important, but it should be comforting to know that you already have people in place who know how to make the business run smoothly.

While there are many clear cut advantages to buying an existing franchise business, it doesn’t mean go into the deal with rose-colored glasses. The evaluation and consideration of this purchase exercise is solely up to your judgement. You should be on your guard about several aspects of the deal.

Find out if you can ascertain the true nature of why the existing owner is selling the franchise. What is the owner’s motivation in putting the operation up for sale? The answer to this question and how you interpret it can have long-lasting effects on your turn at the helm.

Review the financials of the existing franchise. It’s advisable to do this with a seasoned business executive, such as a CPA. Find out where the business is doing well. And if it isn’t, find out why. You’ll have to take the good news with any bad news and make an informed decision as to whether or not you will be a difference maker as an owner.

Don’t just talk to the existing owner. Make an effort to talk to customers as well. You’re likely to get the most unbiased opinions from seasoned patrons of the franchise business.

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. What we want is what’s right for you. If that means launching your own franchise from scratch, we can do that too. But if you’d like to take a more frugal route, come see what we have to say about the purchase of existing franchise businesses that are up for sale in your area.

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