Why buy a franchise resale
Article by Suzanne Melville
You do not always have to start a franchise from scratch. Many existing franchisees across the UK are looking to sell their business.
As the UK market matures, this is becoming an increasingly more popular way of buying a franchise. In this article, whichfranchise looks at why franchises are for sale, resale considerations and the main benefits of buying a resale over a new franchise opportunity.
Firstly, let’s look at why a franchisee could be looking to sell.
- the franchisee is looking to retire
- the franchisee has achieved what they wished to achieve when they bought the business and their exit plan was always to sell at this point
- they may be looking to relocate and so it is not feasible for them to run the business
- they could have poor health or be needing to take care of an ill family member,
- they may have other business interests which they wish to focus on
- Or the franchisee could have picked the wrong franchise for them and hasn’t made it work
Considerations for researching a resale
Before we look at the benefits, we should remind ourselves that whilst the business is one that is currently trading, you still need to do the same due diligence as you would when buying a new franchise.
Don’t take anything for granted, especially as what works for one person, may not work for another. So, just because a business is currently successful, it doesn’t necessarily mean that you can have the same instant success if it is not the right business for you. It is important that you find a franchise business that you would enjoy working in and it is one that fits your skill set.
Equally, if the franchise is underperforming, then it does not necessarily mean that there is anything wrong with the company, if could be that the franchisee picked wrongly and now doesn’t have the desire or commitment, or potentially the skills, to make it work.
To make sure that it is the franchisee and not the company, and there is potential for it to be successful, you need to look at why the franchisee couldn’t make it a success. Make sure you speak to other franchisees in the network to see what they have done differently and how well they are performing. Basically, make sure it was the franchisee who couldn’t make it work and not vice versa. Finding out more about the company and its franchisees will give you a better understanding as to what the issues could be.
Also, is it a member of the British Franchise Association(bfa)? This is another key area to address.
So, what are the main benefits of buying a resale?
History of past performance:
One of the main benefits of buying a franchise resale is that you have past accounts to look at and you can see how successful the franchisee has been. The accounts will give you a true picture of the performance of the company, which will help you to value the business. Having known data will make business planning easier and will help you when putting together a business plan for acquiring funding from the bank (if required).
Instant cash flow:
Compared to starting a franchise from scratch, which could take anything from 12-18 months before you start to make a profit, with a franchise resale you could see instant cash flow. This is down to having a client base of existing customers and brand recognition in your local area.
Having an established and knowledgeable team in place is a major benefit of buying a franchise resale. They will be trained and experienced in the day to day of the business which is a massive advantage to any new owner looking to get to grips with the running of the business. The existing owner may also stay on to help with the handover of the business.
Last Updated: 18-April-2017