When the owner of a franchise has decided to put his business up for sale, you could get the advantages that come with both running a franchise and buying a business.
If you purchase a franchise instead of a traditional small business, you get to run your own business while using the brand energy, advertising/marketing power, and the administrative and technical assistance of an established franchisor.
Looking for quick profits?
If you are acquiring an established franchise, then not only do you have the company brand and other systems in place; the entire business is already running, ready to go. You won’t have to wait for leases, build-outs, new equipment delivery and installation, etc. (though you do have to sign a franchise agreement).
That is not to say, on the other hand, that resale buying is a quick process. Like any major purchase, going through all of the business transaction and legal procedures can make it a time consuming enterprise.
When the closing day comes, however, you will be inheriting a business with an established presence. This will hopefully translate into quick operating profits because of the already established location and customers. This is unlike opening a new business where prospective customers would have to become aware of the new business.
This will be significantly easier if you are opening a well-known franchise, where you know brand knowledge will likely bring in customers right away.
Another plus to purchasing an existing franchise is you will also inherit a fully-trained staff. This will save you valuable time and energy that you may have had to spend recruiting and training new employees.
The benefits of inheriting an up-and-running franchise need to be analyzed, however, in the due diligence phase of the business transaction. For a smooth transition, be sure to look for a franchise that has a fully trained staff, a well established and positive reputation, and a fully equipped location.
After you uncover any issues during due diligence, you will have the opportunity to renegotiate the terms of the sale based upon what you find. If you discover aspects that may hurt your bottom line, you may be able to renegotiate your costs.
Should you be concerned that a franchise is up for sale? Does this mean that business is down and the current owner is trying to get out before the ship completely sinks? The answer to both is probably not. There are many reasons why any business owner decides to sell, and they can range from going into retirement to just wanting to start a new business venture. It is important for you as a prospective owner to figure out the real reason the current owner has decided to sell during due diligence.
Purchasing an existing franchise may be the right path for you because it will allow you to hit the ground running. Just be sure that you use your due diligence period and the services and knowledge of your business broker when deciding whether or not to go ahead and close the deal.
Are you interested in purchasing an existing franchise, but have questions about how the process works? Please feel free to leave us a question or comment here, and we will be happy to get back to you.