So you’re ready to take on a new role as a franchise owner. That’s great! It all starts with acquiring a franchise business. Rather than paying to build a new location, you find there are opportunities to purchase a franchise that’s already established in your area. Do you go for it? While there’s often not a clear cut answer for whether you should or should not purchase a franchise, consider some of the following thought points before making your decision.
Business is Ready To Go
If you were to purchase a franchise that’s already open for business, you could transition quickly into your role as the owner with the current employees, vendors, and customers. The vital operators of the business are there, so you can get to work and bring in cash flow right away. However, while many of these pieces are in play, don’t forget that changes do happen when any business undergoes a management change. Old employees and even customers may leave, but there’s also the possibility of bringing new talent and patrons.
Research the Records
You’ll probably ask to see the financial records when you are looking to purchase a franchise. Luckily, the existing business should have enough of a history to be able to show you their past business trends and analytics. This will definitely indicate to you whether the franchise is headed for success or disaster.
When franchisors resell their established business, the price is more negotiable than the “buying-in” price of setting up a new location. You’ll be able to leverage more concrete details in the sale for a fair — and often, lower cost — than the original asking price. The price you can afford or willing to afford can determine whether you can further pursue a franchise purchase.
Franchise Agreement Terms
Asking other current franchisees can help you gain valuable insight during your research phase. While they can give you information on business operations, don’t expect their experience as an owner to translate the same way for you. Franchise agreements, even for those under the same franchisor, won’t contain the same terms and benefits for everyone. Your potential copy of the contract may also require you to pay higher fees than expected.
Why Is It for Sale?
Try to look at this “convenient” opportunity as objectively as possible. Why is the current owner looking to sell the franchise in the first place? Look for anything that may further implicate your business if you were to purchase the franchise, such as local competitions or consumer-market factors.
Buying With Atlantic Business Brokerage, Inc.
At Atlantic Business Brokerage, our mission is quite simple; we help sellers sell businesses, and buyers buy businesses! Over the past 30 years, ABBI has facilitated the sale of countless commercial properties, businesses, and franchised locations. With our unparalleled knowledge of the business purchase and sale industry and our network of contacts, we offer services to both buyers and sellers that no other brokerage firm can match.