While many franchisees plan for economic downturns,...
Here's What You Need to Consider
As part of your franchise search, you may have come across existing franchise locations for sale. These can be appealing because they offer the benefits of an already established business as opposed to starting a new franchise on your own. You'll be able to join the system with a business that already has some clientele in place, which means you can get trading quickly and bypass things like logistical considerations, location selection and some financing hurdles.
When you are buying an existing franchise business, the purchase price may be more open to negotiation depending on the circumstances and the owner's desire to sell. This can be a big advantage if you can't or don't want to invest in a brand new opportunity, where the terms and conditions may be less flexible.
The existing franchisor should be able to provide you with information that you can analyze to understand the current vitality of the business and any challenges it may have faced in the past. Business accounting records, sales figures and other metrics will all paint a picture of how the business has operated during the current owner's term. This can be a particular advantage because it can help you minimize risk and assess the viability of the opportunity in real time.
Take the time you need to review these records. If you suspect the owner is not producing all the records you've asked for and is deliberately hiding things, move on to the next opportunity.
However, keep in mind that buying an existing franchise has research requirements and risks, just like investing into any other business would. A business that seems successful on paper now could be heading into financial trouble in the future. Before you buy, you need to discover and confirm as best you can the reason the owner is selling and the circumstances surrounding their decision.
If the thought of taking over an established business doesn't appeal to you, buying an existing franchise isn't the way to go. However, if you decide buying a current franchise is what you want to do, you should still research the process of opening an entirely new location. This will help you understand how the resale franchise has established itself over time so you can consider the obstacles and benefits the owner experienced and weigh them as part of your final decision.