What is a turnaround opportunity? For all intents and purposes, in terms of small business…a turnaround opportunity is a small business that for a variety of reasons is no longer profitable. In today’s market place, there are many of these opportunities available. Through no fault of their own, many business owners were not able to navigate through the stormy economy over the last few years.
Even if they are “still alive” many business are in a position where the current owners do not see an avenue that will take them back to profitability. But this does not mean that this is the case for a new owner.
Often after struggling to right a failing business for several months or even years, some owners are ready to call it quits. They do not have the store of operating capital needed to keep things moving or make the necessary improvements that might be needed to turn the tides. Many are “burnt out” and just can’t face the grind any more. And others are likely looking in the mirror and realizing that they are not ideally suited for business ownership.
There is an advantage to buying a turnaround opportunity in franchise resale situation. As a buyer you can look at whether or not the seller has been really following the protocol and business model that the franchisor required. Often new franchisees will open their new franchise and realize that they were not cut out for the discipline and commitment to process that so many franchisors require. This alone can have such a negative impact on a franchised business that there is no real turning it around with the current owners unless they are willing to change their ways and follow the model.
This situation coupled with the challenging marketplace that has existed over the past few years has resulted in a high number of turn around opportunities in the franchise community. For a buyer that is ready to roll–up their sleeves and right the ship, the initial appeal, of course, is the chance to buy into a business for significantly less than it would cost if it were cash-flowing, but even more importantly for a fraction of what it would cost to open a brand new franchised business. Although this of course is not good news for the seller…it is the harsh reality.
When looking at a turnaround opportunity that is franchised you have several questions that you need to ask yourself:
If the answer is yes to all of these questions then the only other thing left to do is your due diligence and research on the opportunity itself.