25 Apr Buying Franchise Re-sales (Part 1 of 2)
Franchise re-sales offer the possibility of quick profits.
If you buy a franchise resale – where the owner of a franchise has decided to put his business on the market – then you can reap the benefits that come with both buying a business and running a franchise.
As we’ve said elsewhere on this site, when you buy a franchise for sale you get to run your own business but with the brand power, marketing muscle and technical and administrative support of an established franchisor.
Quick profits
But if you’re buying an established venture, then not only do you have the readymade brand and off-the-shelfsystems, but the whole business is up and running, ready to go. You don’t have to wait around for the selection of a site, the signing of the lease, the decoration of the store, the installment of equipment, and so on (although you do need to sign a franchise agreement).
That isn’t to say, however that the resale buying process is necessarily quick. Like buying a non-franchised business or a house, it can be a protracted process going through the necessary legal checks – if you do things properly, anyway.
But when you do close the deal you inherit a business with an established presence. This translates into quick custom and quick profits – an established shop will have established customers.
It will take time for your potential customers to become aware of the existence of a new store.
It is important not to overstate this factor, however. After all, if you set up a Subway or a McDonalds on the high street tomorrow, you can be fairly assured you’ll get a healthy amount of custom from day one.
With a service-based business it’s a bit slower getting things moving. If you set up a fitness franchise, for example, it will take time to lure the members whose renewals will be your lifeblood.
As well as customers you will hopefully inherit fully trained, committed staff. Having people in place who know what they’re doing, as well as having established suppliers, will help the opening phase to your stewardship run smoothly.
But what if you don’t inherit these things? If you don’t investigate the business properly, instead of inheriting all the components of a fully functioning, healthy business, you might inherit a raft of problems.
This means doing your research is paramount, and negotiating the price down accordingly whenever you uncover flaws in the business you’re buying.
Not only this, but you need to consider the effort, patience and expertise needed to rehabilitate the business and ask yourself: are you able and willing to do it?
When you’re buying a resale you need to check the status of the lease and the condition of the equipment – if it’s likely to need replacing soon then ensure its accounted for in the price you pay.
Tomorrow’s posting will complete this article with a focus on company culture.
