When it comes to owning a franchise your options boil down to buying an existing franchise, ie: a franchise resale or starting a new one. While the differences in the two are pretty obvious, there may be a few key differences and angles you may not know. Let’s explore some key differences and pro’s and con’s between the two options.

Franchise Resales vs. New Territory Start-up

When it comes to buying an existing franchise the biggest benefit, in most cases at least, are you are not only buying the franchise but also the current revenues and cash flow. You are commonly leap frogging the delay in getting ramped up when it comes to things like location build out, ordering and wrapping vehicles, hiring key staff and all the other elements that are going to be required to launch the business.

Like buying most any business you are paying for the assets and the value of the revenue. Depending on the state of the business, this of course can mean you are paying a premium but are also buying an existing revenue stream.

What many people don’t realize is even though you are buying the business from the current owner, since it is a franchise you still have to do the whole franchise discovery process and be approved by the franchisor no different than you were buying a brand new territory. I tell my client’s all the time, “you and the seller can agree on terms and can show up with a briefcase full of cash and we still can’t do the deal until you have gone through the legal discovery process and are approved by the franchisor”.

When it comes to exploring a franchise resale, be ready to go through the process and bring your A-game as at the end of the day, any great franchise wants top notch franchisees and always have right of refusal. As frustrating as it can be, if and when you become a franchisee with their brand you will appreciate that they guard the gate and strive to only bring in the best.

Resales are great simply due to the fact that you are more likely able to take money out of the business much sooner if not immediately compared to starting a new territory.

So what are the advantages of going the new territory route? Assuming a resale does have strong revenues, your initial investment will be less although you are probably looking at a 6 -24 month time frame for your first pay-day depending on the type of model. Sometimes resales have issues where a new territory is a fresh start. Probably the biggest advantage of a new territory vs. a resale is options… For most, in most markets your options are exponentially greater with new territory franchises compared to a resale. In most major markets your choices on a new territory outnumber available resales by easily 150 to 1.

Best advice? Explore them all… Great opportunities come in all shapes and sizes.

When it comes to franchise resales there is one other angle / category I want to share that can sometimes offer the best of both worlds… I call them walk-aways. You may be surprised at how many people buy a franchise, or start a business, get it 50%-80% of where it needs to be and give up. Maybe they ran out of operating capital, maybe they ran out of steam, maybe life happened and has forced them to shift. Walk-aways rarely come with much cash flow to speak of but can offer a significant head start comparing to starting from square one and can often be purchased for less than the cost of a new territory simply due to the fact that you have a very motivated seller.

I work with clients on both new territory as well as resales including both high revenue models all the way down to walk-aways so feel free to reach out to discuss options for your local market.

Submitted by Marc Stephens with Success Franchise Advisors

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