Business Buying Tips - Should you buy a franchise resale?

Purchasing An Under-Performing Franchise

One of the main advantages of buying a franchise resale is the existing customer base meaning you’re generating income from day one.  Additionally, it’s also easier to assess the likely profitability of the franchise from past financial performance, unlike when starting a cold start business. You can also benchmark against other franchisees in the network running similar sized territories.

However, what if a quick look at the books reveal that the franchise is underperforming? Do you run for the hills, or do you investigate further?

The key is to consider the real reason why the business is for sale; not all franchisees aim to build up a business only to sell it when it’s at its peak. There’re many factors to consider – is the current owner retiring? Have they stopped marketing? Do they have personal issues which have brought them away from the business? Was it effected by Covid-19? If this is the case, it could mean you’re looking at potential goldmine!

Sometimes, an outgoing franchisee who has worked in the business for a long period of time may have struggled to see the wood for the trees. People tend to spend time on the jobs they like doing and skimp on others, which can result in a situation where the operation is not being run as optimally as possible. Therefore, when going into the business it will be important to recognise where your own strengths and weaknesses lie so you don’t fall into the same trap. Play to your strengths and be prepared to delegate jobs that you don’t enjoy or are not good at to someone who will be able to manage them better.

Franchise Resales top tips for purchasing an under-performing resale:

  • Ensure that business has been valued properly
  • Follow the franchisors advice – they will advise which areas may need more attention to turn the franchise around
  • Evaluate every aspect of the franchise from top to bottom to see how overall efficiency can be improved

Turning around an underperforming franchise is hard work, but it can reap rewards more quickly than starting a brand-new business because there will already be an established client base. With some fresh eyes and enthusiasm and support from your franchisor, it could be possible to be bring home an excellent income very quickly.

Speak to the team at Franchise Resales for some more advice on this topic.

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