There seems to be a general sense of optimism beginning to flow around the country – thank goodness I hear you cry, it’s been a long time coming.
Naturally not all people are feeling this nor are all sectors of business thriving but within franchising and especially with the sales of existing businesses – franchise resales – most things are on the up. Franchising has always been that bit more secure than new-start stand-alone operations and buying a franchise resale with all the added benefits that accrue from doing so makes it even more secure.
This inherent security is one of the things I impress upon would-be investors looking at buying a franchise for the first time. Primarily prospective franchisees will think about it as a source of income, which of course it is. But buying a franchise isn’t like buying a job. It’s a real investment; one that, with the right level of input, should ensure the business appreciates in value over the term of the franchise agreement and enables it to eventually be successfully sold on to new franchisees.Buying a new franchise, one with a territory for example, will involve the initial franchise fee payment, and will then require the input of the franchisee who, with the support of the franchisor, should market and grow the business until it is profitable. If, after five years, which is the typical term of a franchise agreement, the franchisee then wishes to sell, multiples of the initial outlay should be able to be recouped based on the business’s success over that period.
Buying a franchise resale is a slightly different story, requiring a greater amount of due diligence by the purchaser, and a more robust breaking down of the figures – particularly turnover and profit. The upside to buying a franchise resale however is that it is much easier to see how well a business has performed, versus how well a new business is likely to perform. It’s an important distinction. What it means is that, while buying a new franchise can to some extent be ‘finger in the wind stuff’ buying a resale is more comfortable in the sense that you know the track record of the business at the start.
With detailed provision of information by the seller – not just the accounts – and careful assessment, you the prospective purchaser, will be able to unpick the business. This will enable you to see if there are areas where it can be improved: has the former franchisee been as hot on local marketing as you intend to be? Are there logistical elements to the business that can be tweaked to boost performance? What were the former franchisee’s personal circumstances – why is the business for sale? These are all things to consider when purchasing a resale as they give clues as to where you might be able to take the business in the future. And it’s imperative to look at the business from all angles. A bit like buying a house – you need to see it at different times of the day and different times of the week…does that irritating Cocker Spaniel bark all of the time?
When buying a franchise you’re making an investment, and you want it to be as informed as possible. Once you’ve put ink on paper, you don’t want to discover that all of your imagined nightmares are quite real. Which is why using a service such as that provided by Franchise Resales Limited genuinely helps to smooth what could otherwise be a challenging process for franchise sellers, potential franchise buyers, and franchisors. Franchise Resales aims to remove the potential hassle from the resale process for both purchaser and seller. Starting with the planning of the sale, Franchise Resales pulls together all the details of the business that any prospective purchaser will want to see and discuss. The whole Franchise Resales system and process is designed to make the experience for buyer and seller one which is smooth and structured.
In a nutshell, sellers require a structured approach because they want a swift sale of the franchise they’ve worked to build; buyers do because they want to invest in a going concern but need to understand the detail of that business and so make a confident investment; and franchisors (with an entire franchise network to worry about) want an experienced third party to handle the complex resale processes and remove the headaches that can come from brokering a franchise resale.
At Franchise Resales, we have a team with real experience in making the buying and selling of a franchise as seamless as possible. As with many things, it’s about entry and exit. And we at Franchise Resales like to ensure the revolving doors are as draught-free as possible.