Last Updated: 18-September-2012

Why existing franchises are for sale

One out of every twelve businesses in the US is a franchise operation; with a new franchise business being opened every 8 minutes of each business day.

These figures alone show the enormity of the US franchise market, and because of this the resale of franchise businesses is also huge.

A franchise resale may be a good option if you find the thought of building up a new franchise from scratch a little bit daunting, but expect to pay a premium for buying an existing franchise – sometimes as much as 30%.

There are, however, added advantages to paying a premium. As well as the traditional benefits of franchising, including the training, support and use of a proven business format, when purchasing a franchise 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.

An established franchise business will be able to provide some actual performance figures, together with any management figures produced. You should be able to verify these figures with the franchisor, and also seek advice from 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. And why not also conduct some of your research through the existing client base – 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 have to pay. Conversely, if you find that the existing 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!