Franchise Resales – Expert Tips for Buying an Existing Franchise
When most think of buying a franchise they tend to envision starting a brand new location from the ground up. Many do not realize that just like any other business, there are lots of great franchise resales available today covering a wide range of industries and investment levels. Knowing what to look for and what to look out for can help you target the right investment while avoiding common mistakes.
Let’s start with exploring reasons why people may sell their franchise… Unfortunately there are a lot of people that buy a new franchise and never actually get started with the business or quickly learn they chose the wrong model. This does not mean that anything is wrong with the franchise itself, the owner just jumped the gun or didn’t do the proper due diligence when making their decision. Since it is likely that these are not going to be thriving businesses yet, a new owner can often get them for a great deal since the owner just wants to move on. The advantage here is a new owner has a small running start to take the wheel and grow the business to its full potential in a shorter amount of time than it may require to start a brand new location.
Another reason an owner may be looking to sell their franchise is no different than any other business owner… Life events have them ready to make a change. This could be retiring or simply moving on to a new venture. In these cases it is more likely that you will be buying a more established business with a larger revenue stream so be prepared to pay a premium as a large part of what you are paying for is the revenue. The benefit here is that most likely you will have positive cashflow from day 1 of owning the business.
Nearly every franchise system out there has owners looking to sell. This in no way means something is wrong with the franchise, it’s just natural. One thing to look out for though is if a franchise has an abnormally large number of current franchisees wanting to sell proportionate to the total number of franchisees in existence. This can sometimes indicate something negative has changed with the franchise or even that particular industry. Blockbuster for example! That was a great business but the model simply could not compete with streaming.
When buying an existing franchise be prepared, even though you will have to come to an agreement with the seller you are also going to need to be approved by the franchisor. This may involve various requirements such as financials, background, skillsets, etc. Bring your A game and be prepared to impress the franchisor letting them know you are very serious about taking the business to the next level. They are not trying to play hard to get but owe it to themselves as well as their other franchisees to maintain a strong pedigree of owners. Something that as a franchisee you too would appreciate.
While more and more franchise resales are getting posted to this site you may want to reach out to someone like Success Franchise Advisors who not only are experts in franchising in general but handle a large number of resales for dozens of top rated franchisors.