Why existing franchises are for sale
Johnny Sellyn, Founder & MD whichfranchise.com outlines the reasons that franchise resales exist.
As the franchise market in the UK matures, the resale of franchise businesses is becoming extremely common. There are many reasons why there are franchises for resale in the UK, including:
- The franchisee is retiring
- The franchisee is looking to relocating
- The franchisee has other business interests that they need to concentrate on
- The franchisee, or a loved one, are ill and so they are unable to give a 100% commitment to their business
- Their exist strategy has always been to sell the business after a certain amount of years and to make a profit
- They have realised it is not the right business for them
What sets a resale apart from a new territory?
You may pay a premium for buying a UK franchise for resale, perhaps as much as 30% if the business has a good track record, but if a greenfield site that needs building from scratch is a daunting thought, a franchise resale may be right for you and worth the extra money.
As well as the traditional benefits of franchising, including the training, support and use of a proven business format, when purchasing a franchise for resale you are able to take advantage of actual trading accounts and of course an existing client base, making your future a little easier to predict.
What you should look for
An existing business should be able to show you some actual performance figures, together with any management figures produced. You should also be able to obtain from the franchisor the figures provided to them by the franchisee for verification.
Also seek the advice of an accountant as to whether the sale price represents value for money. If the franchisee has any staff it may be useful to ask them what they think of the business.
Why not also conduct some of your research through the existing client base – after all it is they who will keep you going in the future. Are the customers happy, can you retain them once you have taken over, how can you enhance the customer experience in the future and are there more customers out there?
Pay some attention to the existing franchisee’s relationship with their customers and if there appears to be little loyalty be aware that you may have to rebuild confidence and equate this to the premium that you may be being asked to pay. Conversely, if you find that the franchisee has an excellent relationship with clients, consider a hand over period to allow a smoother and more effective transfer of ownership and of course ultimately success for you!
