If you’re interested in franchise opportunities, you may be wondering if there is an alternative to buying and launching a brand new franchise. There is, and it’s known as a franchise resale. In this scenario, instead of starting up a franchise on your own, you purchase one that’s already operational from the existing owner, or franchisee.
A franchise resale can be an attractive option for buyers. It offers some advantages and mitigates some of the initial growing pains that come with opening a new franchise. That doesn’t mean that a resale is without risks and downsides, however. It’s important to understand how to approach a resale in order to avoid some potentially costly pitfalls.
Below are four things you’ll want to evaluate before assuming ownership of an existing franchise.
1. What is the seller’s motivation?
There can be many reasons why a franchisee chooses to exit the existing business. Perhaps their personal situation has changed and they no longer have the time to devote to the business to make it successful. Or maybe they’re nearing retirement or relocating to another city or state. The one reason most sellers won’t likely disclose, though, is that the franchise isn’t profitable.
Asking the following questions of the current franchisee (and obtaining related documentation) will help inform your decision:
- Why are you selling your franchise?
- How has the business performed financially over the past two years?
- What are the trends in this area and how might these affect the business positively or negatively?
- What role does the location play in the success or struggles of the business?
- Will there be any problems renewing the lease?
- What are the market conditions that could affect the business now and in the future?
2. Is the business successful?
There are plenty of successful franchises for sale. But there are also many sellers motivated to sell because they’re consistently Read More Here