Considerations for an Existing Franchise Purchase

One of the best reasons that many entrepreneurs enter the world of franchising would be that, in a broad sense of the word, it is perceived as a "turn-key" operation, given all of the marketing, branding, training and overall support you can receive from the franchisor.

Taking that "turn-key" approach to the next level might be someone's rationale for buying an existing franchise for sale where presumably the owner has an established base of customers, vendor relationships and possibly, owner financing. Before you decide to go in that direction, however, it might be a good idea to carefully review some of the advantages and disadvantages of that strategy:

• Start by reviewing your overall business goals and aspirations. For example, just because the franchise location might be convenient for you may not mean it is convenient for customers because of pending road construction.
• Conversely, a site not so close to home may be prime for new development which could add store traffic.
• If your desire is to own several units, getting involved with an existing location may not match your financial targets or demographics. If these issues do not represent hurdles for you to achieve your goals, then you should proceed to do your due diligence. Here are a few methods to consider for learning about the existing franchise:
• Check with your franchise broker who can help you find existing franchises that may be for sale that match your interests.
• The corporate franchisor may also be a source of information about the performance of the existing unit(s) for sale.
• Consult with your financial advisor and arrange to review the "books" for the past couple of years in order to determine cash flow, expenses, taxes, margins, and other financial data.
• It is also advisable to retain an attorney so that you can ascertain if the seller currently has, or has experienced in the past, any litigation, or perhaps has other building code, tax, or human resource issues.

You need to be inquisitive and intuitive at the same time. Even as you rely upon your accountant or attorney, you - the actual potential franchisee - need to ask pointed questions, and probe deeper as to why the current owner wants to sell.

Do not conclude or assume anything until you are totally satisfied with every answer. That way you will enter into any agreement with your eyes wide open and with full confidence in your business venture.

Our FranFinders franchise consultants can assist you in finding both a new franchise or when you are considering an existing franchise for sale.