How to Research Franchise Resales and Buy an Established Business That Works for You

c6Looking to own a business but want a head start? Here’s how to sharpen your focus and secure your shot at franchise opportunity success…

If you want to embark on business ownership but wouldn’t mind a potential head start, it’s time to look at franchise “resales”.  With a franchise that is already up and running, you could benefit with staff and equipment in place and a working operation with some foreknowledge on customer trends.  You will also have an idea about which marketing strategies and special offers have been most (or least) effective.  Of utmost importance in your planning must be, of course, to select a firmly established franchisor who will back you all the way in key areas, starting with the research phase.

Indeed, you have a lot of homework to do in order to make sure that the existing franchise you may buy is a wise investment, even if they look good on paper.  It requires digging deeper than the financial figures and talking to the owner of the business as well as officers representing the franchisor to get a clearer picture of the reasons for the sale and to determine how you can capitalize on the situation.

Frik Van Niekerk, Regional Vice President in South Africa for Minuteman Press International, advises a thorough understanding of franchising opportunities on a broad scale before isolating whether a new or existing business would be the best investment for you, personally.  He explains further, “You first have to familiarise yourself with the brand and with the franchisor in terms of creditability in the market place.  You have to be sold on the franchise concept before even making a decision on a new or existing franchise.  Doing a proper due diligence of the business for sale by looking at the two main aspects that determines the value of the business (namely the asset value and a formula on the profit of the business) is vitally important.”

Assume nothing – except that you have potential for a great deal

You will find franchises for sale for a variety of reasons, just as there are a variety of personality types and business mindsets among entrepreneurs.  Some have enjoyed a successful run and are ready to move into the next phase of their lives (perhaps retirement) and some businesses simply need new leadership on a practical level.  One of the neat things about buying a franchise “resale” is the fact that you do not have to assume that a business that has profited poorly and that is a reason to turn it away.  Quite the contrary.  Many franchisees enjoy long, successful careers and are ready to sell their businesses to move on to a new stage in life. Also, by interviewing the franchisor and conducting market research you may learn that there is quite a healthy demand in that area for the company’s products and services. You may, therefore, have a golden franchise opportunity in which you can assume ownership of a business that is on the right track or change the entire approach (usually by realigning with the franchisor’s proven system) thereby reducing expenditure, improving sales and building an even stronger business.  Simply put, your research into existing franchise opportunities could land you a “great deal” as a new business owner.

Jeff Robey, Florida Regional Vice-President for Minuteman Press International has helped many entrepreneurs find the ideal situation for their personal potential.  He indicates that it’s really not complicated to uncover the facts and find a winning situation for your personal goals and inclinations, but it does require research.  Jeff puts it plainly, “By contacting the franchisor and inquiring about resales they have, then meeting with the franchise representative and also visiting existing franchisees to learn more about the franchisor, you will have the best way to go about researching an existing franchise opportunity.  You need to find out how the franchise system works by talking to successful people in the business and properly evaluate the resale opportunity.  In this way, you will be able to determine why a certain business may be struggling or why it has been successful.”

When the perfect franchise isn’t necessarily “NEW”

For some people, the process of reviewing business opportunities helps them get in touch with a personal inclination that a new franchise is the best way to go but in other cases, an existing franchise opportunity is just the right fit.  The determining factors are specific to your region and your needs, so find a franchisor you can trust and allow the officers of that corporation help you explore ALL of your options.  However, if it turns out that your best option is a franchise that is already in operation, there is comfort in knowing that the right “resale” from a franchisor that is vested providing the greatest chance for you to do well can be great match for your goals.  In fact, you should take a special look at underperforming franchises because there are an impressive number of selective entrepreneurs who can tell you that investing in such a franchise was the best business decision they have ever made.

While it still requires steadfast dedication, taking the reins of an existing franchise allows you to launch into business while bypassing some of the managerial weight and details that come along with buying a new franchise and starting from scratch.

What you may discover with a resale is that you are buying an established franchise location with a reputation rooted within the particular market and community you will be serving.  Additionally, you will be inheriting established financials and “good will”.  Of course, it is still necessary to put forth energy into examining the current franchise agreement as well as the financial status of the business to make sure these important variables will work for you.  Also, you need to get to know your potential franchisor to determine if you will mesh with their system and their support staff as you will need to know that their specialists will be a reliable presence. They need to be in your corner for the long term.  Frankly, not all franchisors provide the proper support or their support fizzles out over time and many do not take care of you at the local level at all.  This is inferior value and you simply need better.

Dave Johnson, Minuteman Press, Coral Springs, FL, found, after conducting his research into franchise opportunities that a resale option was just right for him.  However, as each particular existing franchise location has its own history, Dave determined that the “pros” outweighed the cons and he is now the proud owner of a successful digital print, design and marketing franchise.

Dave Johnson gives us his list of “Pros” and “Cons” for franchise resale investors:

Pros:  For buying an existing business:

  • You will have an existing customer list, you don’t start from zero. This is a HUGE advantage!
  • Your business and brand will already have a presence in the community. You can build on that and take advantage of those inroads that were already made before you got started.
  • You may inherit experienced staff, which if they are good may help in the transition. When we purchased our franchise, we had a press operator that had been with the store 10 years, who brought a lot of talent and experience that helped tremendously.
  • If you are buying an existing franchise, the franchisor should be able to provide you with full training and ongoing support to help you learn the ins and outs of the business you are taking over.

Cons – and how to deal with them:

  • If the business was not doing well or had a poor reputation you will have to some marketing work to do to overcome that, but if you do, the rewards can be great. Dave elaborates, “We were in that situation. We made some specific changes to how we staffed our business and operated our business based on feedback we had from clients and we were able to recover a number of clients that had been lost – a couple of which resulted in a significant business increase.”
  • You need to check the condition of the production equipment you are purchasing, to make sure there are no major issues looming. It’s not hard, just bring in service personnel (not affiliated with the current owner) to assess the condition of the equipment. Your franchisor should assist you in this regard.
  • Have a business advisor you trust evaluate the value of the business so you can negotiate effectively on the purchase price. An underperforming franchise can actually turn out to be a great deal.
  • You may have staff that is actually holding the business back, in which case you need to determine that quickly and make the appropriate changes. Fortunately, in our case, that was not the situation, but it is something you need to examine.

Dave Johnson sums it all up with a practical perspective, sharing, “The pros can be a significant advantage in the right case and the cons can be very manageable and can be turned around to your advantage.   Before buying, put together a business strategy that allows you to take advantage of these conditions so you can get the best return from your investment.”

Ultimately, you may research franchise resales and find you cannot wait to sign on the dotted line and that it is your best path to business ownership.  At this point, you will need to determine the value of the franchise as well as what you are willing to pay to take the keys to the front door and assume command.  It helps that you will be able to deal (in terms of value) with existing earnings, so the valuation part of the process could be a bit easier.

The great thing about your resale purchase is that you stand to gain the stability and whatever profits the operation offers. It is an operation that you can now decide is worth the leap as you have taken the time to do all the proper research.


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