The Pros and Cons of Purchasing a Resale Franchise
The Pros and Cons of Purchasing a Resale Franchise
By Trish Benedik
The resale of a franchise business is a natural part of franchising. There are a number of reasons why a franchisee decides to sell his business including retirement, relocation, personal issues, or they have other business ventures they are looking to fulfill. A franchisee deciding to sell his/her business may become a dream business for you. Before you know exactly what you are getting into, take a look at the pros and cons of purchasing a resale franchise.
Earn Cash Immediately
Provided the business is showing a profit. Buying a business that already has a steady income means you are buying into a business that will make you money right away. Starting up a new business will mean months of work before you to see any profit. For a resale franchise, as soon as you have completed the necessary training, you will be able to start operating your business and earning an income.
Purchasing a resale franchise means you are taking over a business that already has a trained staff. You are not faced with finding all new employees and paying for training. An established business also has an existing customer base that knows what your business has to offer.
The financials of the resale franchise should be available to qualified buyers for the past few years. This makes investigating the investment potential for the franchise for sale much easier than making financial projections for a new business.
A franchised business has all the support of the franchisor. The franchisor already has a business model and marketing strategy in place for whoever decides to franchise their business. The new owner of a resale franchise is fortunate because they have the franchisor and the support of the previous owner who can offer guidance and advice.
New Guy on the Block
Taking over an existing business can be difficult for those already involved. For one, long-time customers may be weary of a new business owner coming in and changing what they like. Taking over can also mean you now lead a staff that are not willing to change or accept new ownership. To prevent any problems, you will need to take the time to earn the trust of customers and staff.
Time Consuming and Hard Work
Learning the ins and outs of a business new to you takes time and hard work. The business you have purchased may have been on a downward spiral. This will require a lot of effort repairing relationships, changing the business image, or even renovating.
Wasn’t Always Your Business
Taking over an existing business means there will always be an element of unknown. You will not fully know the history of your business, which can be hard for some owners to accept. People also tend to feel pride in starting a business from the start, which cannot be felt from a resale franchise.
Upfront cost is higher
Resale franchises are generally much more expensive than start-up franchises. The owners will want compensation for their hard work and years of building the business including good will and customer base. Be sure to calculate your return on investment and have an accountant verify the financials before making a decision.
Lower Asking Price may be a Red Flag
If the asking price is lower than the initial cost to start the franchise, find out why. There may be a good reason or the business may not be viable in the current location. Be sure to flush out the reasoning. If they are having difficulty, then find out what you will need to do to turn around the business. Some businesses are better left to someone else.
The territory may not be available in your market
When you start a franchise, you have the ability to choose your territory. When purchasing a resale franchise, the territory is already established and you are purchasing the territory where it is, not where you want it located.
We recommend performing a thorough investigation into any franchise or business you are looking into to make sure it has a promising future. Consult and attorney and accountant for advice on financials and legal matters.
Contact Select Franchise Consulting to learn about resale franchise opportunities available.
Resale franchises come up for sale occasionally, if you think you might be interested in a business that is up and running and has financial history, give me a call or fill out the interest questionnaire here.
You will still be required to go through the franchises’ discovery process
Let me know if you have interest in resale franchises. You will need to go through the franchise discovery process and will need to sign an NDA for detailed information and financials.
Contact Trish for more information and to assist you in your search for the perfect franchise fit
Keep following my Blog for more insights into fantastic franchise options. Remember owning a business is about matching your skills with the right business that meets your personal and professional goals. My 6-step process will guide you to the right business for you and get you introduced to opportunities that work for you.
What are you waiting for?
Trish Benedik owner of Select Franchise Consulting will help narrow your options and find the franchise that is the right fit for you saving you time and frustration. Our consultation will help you make an informed decision. There are thousands of options in franchising, find the one that is a good fit for your business and lifestyle goals.
Disclosure: Select Franchise Consulting/Trish Benedik/T A Benedik, LLC does not guarantee the financial performance of any franchise, licensed affiliate, or business opportunity. The decision to purchase a franchise, licensed affiliate, or business opportunity must be based on the buyer’s independent research and analysis. Select Franchise Consulting/Trish Benedik/T A Benedik LLC is not liable for any representation made by a franchisor and/or a franchisors employee, affiliate, or associate with respect to real estate, financial, operations, or marketing performance of the business being acquired.