If you are considering to buy an existing franchise that is up for resale, it’s essential that you understand what to look for and what to avoid in the process.  A franchise resale can have some wonderful advantages over starting a new franchise from the ground up, however it can also be problematic.

Franchise resales fall into one of two groups:  successful businesses that are making money and unsuccessful businesses that are either losing money or barely making any money at all.  Both types can potentially be a good opportunity.

You need to determine which group the business falls into now and which group it will fall into after you have owned it for a while.  According to Jeff Elgin, CEO of FranChoice, Inc., a company that provides consulting services to consumers looking for a franchise, you should not make the assumption that the business will stay in the same group that it is currently in.

To figure this out, you should ask the seller what their motivation is for selling and why they want to get out of the business now.  Inquire about the financial performance for the business for the past couple of years, along with the status of the employees.  Ask if they know of anything that has not yet been disclosed to you that could hinder the performance of the business in the future.

Talk with the franchisor and ask the questions that you would if you were considering to buy a new franchise.  You will get valuable information about the franchise and it will help you make sure that you have asked the seller the right questions.  You should also confirm with the franchisor that the information that you are receiving from the seller is accurate.

To read the full Entrepreneur article about Jeff Elgin’s advice on buying an existing franchise, click here.

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