If conditions are right, buying an existing franchise can be a profitable choice that costs less time and money. When the franchise’s business model is a good fit for you, these are some of the advantages and important issues to consider.
Advantages Of Buying An Existing Franchise
You already have trained employees. There is no need to worry about a big investment in training and payroll. Some people worry about employees quitting because of new ownership. However, they will usually stay if you give them a good reason. This also means that you have knowledgeable people who know how the business works, which yields more efficiency and a stronger bottom line from the start.
There is faster income return. Since you already have an established base of customers, you enjoy steady income from the start. If the franchise company allows it, you can offer specials and promos when you take over to attract even more customers. Just be sure to conduct some surveys to ensure that the customers do not have issues or worries with new ownership. They need to understand that services, products and quality will remain the same or improve.
You can save money on your initial investment. One of the best parts of buying an existing franchise is that you do not have construction costs. If the franchise location’s equipment still meets the parent company’s standards, you can save a lot of money. Also, you save a little on advertising. While you still need to advertise, the work is not as extensive as trying to draw attention to a new business.
Disadvantages Of Buying An Existing Franchise
There may be hidden reasons for the sale. The first and most important step is to find out why the owner wants to sell. Do some investigating to verify the answer. If possible, ask the employees about any existing problems. Comb over the financial data carefully.
Financing may be harder to obtain. If the business is in an area that is not ideal, financing can be tricky. Also, some larger franchisers have agreements in place with certain lenders to finance their new sales. If the franchise was struggling and is located in an area that is small enough for local lenders to know about it, this could also affect financing.
You may not get the same franchising agreement. Never rely on what the current owner’s franchising agreement says. You will have new and different terms. Research these in advance. Also, be sure that the franchise parent company has refused to buy the location. They always have first right of refusal. This means that if they did not refuse, you start the buying process and they decide at the end that they want to buy it, they have the legal right to do so.
When attempting to buy an existing franchise, you must work with a professional who knows the difference between starting a new company and buying an existing one.