Buying an existing franchise minimises risk. And existing contracts make the initial years more financially acceptable because of a positive cash flow from day one. These are two excellent reasons for buying an existing franchise business, rather than a new franchise. As an option between an existing business and a new franchise territory, financially the existing business should prove more cost effective and a better buy. Particularly as projections are more accurate as they should be based on audited figures and actual achievements.

The costs involved in buying an existing business will be higher, as additional documentation is involved. But a good franchisor may well have existing documentation already drafted to make this process as speedy and inexpensive as possible.

When deciding whether to buy the customer base and stock or the company, the purchaser should remember that if you buy the company you also take on the liabilities. A franchisor may well grant the purchaser a new franchise agreement, although some franchisors insist that the purchaser takes on the remainder of the term of the existing franchise agreement with the vendor.

Many franchises are now mature networks, and it is understandable that some franchisees will be ready to sell on. Buying an existing franchised business should be viewed as an indicator of success. Some franchises are growing investments – capital assets which can be sold. And when, in turn, the purchaser decides to realise his/her investment, the business can be sold on again to another ambitious purchaser, keen to start with a business that has existing customers and goodwill.

It all depends on how much the vendor grew his business and whether the business has a sound management structure with a history of good audited accounts. The incoming purchaser, who has ambition and drive usually brings not only new “blood”, but new ideas, and will then take this business to the next level of success.

Before buying any business or franchise, undertake your research and your due diligence. Make sure you understand not only the franchise business, but also the history of the business you are buying. Working together with the franchisor and following the system, you will undoubtedly make your business acquisition a great success.