By Aracely Melendez, Express Employment Professionals Franchise Owner
When it comes to franchising, prospective business owners often face a pivotal decision: should they launch a new unit from scratch or purchase an existing one? While opening a brand-new location offers the excitement of building something from the ground up, buying a franchise resale provides unique advantages that can make the transition into business ownership much smoother, mitigating risks and financial hardships.
The Resale Process: From Discovery to Ownership
Purchasing a franchise resale is a comprehensive process that involves several critical steps. First and foremost, it’s important to ensure the franchise is one that is worth the investment. Before investing in a franchise, resale or not, take the time to meet the franchisor to get a better understanding of the franchise’s operations, expectations, and values. This initial introduction is crucial as it allows prospective buyers an opportunity to understand what it means to join this franchise system, including what is needed to take over an existing office. Take time to review the Franchise Disclosure Document (FDD), as this details essential information about the franchise system, such as financial performance, obligations, and other pertinent information.
If the prospective franchise owner determines the brand aligns with their skillset and goals, they’ll then begin due diligence into the local resale opportunity that’s of interest to them. Meeting the local franchise owner is invaluable as it provides insights into the resale business’s history, current status, and future potential. Transparency from both the franchisor and the franchisee is vital to help the buyer understand the business’s assets, risks, and market trends. Purchasing a resale means acquiring a business with an established history and operations, making it important to have a thorough understanding of where the business currently stands.
One of the unique aspects of buying a resale franchise is the ability to examine the business’s performance and client base in detail. This process provides a clear picture of what the new owner is inheriting, including both positive aspects and potential challenges. Understanding the business’s history helps set realistic expectations and facilitates a smoother transition into ownership.
Advantages of a Resale Franchise: A Head Start on Success
One of the primary reasons prospective franchisees opt for a resale is the potential of a faster return on their initial investment. Unlike starting a new franchise from scratch, a resale comes with an established foundation. This foundation includes existing customers, proven business processes, and often, experienced staff. For the buyer, this often means a quicker path to profitability. Building upon an existing business can reduce the initial risks sometimes associated with starting a new business and can allow the new owner to focus on enhancing and expanding the existing operations.
Moreover, the infrastructure is already in place with a resale, saving time and money. This includes everything from office space and equipment to established systems and processes. The new owner doesn’t have to invest in setting up an office, installing necessary equipment, or establishing initial operations. This setup accelerates the business’s growth trajectory and allows the new owner to concentrate on strategic initiatives from day one.
Real Estate Considerations and Challenges
Real estate is a crucial factor in the success of a franchise resale. The location, lease terms, and physical space can considerably impact the business’s operations and growth potential.
Location is a critical element in the valuation and success of any business, especially in service-oriented industries like staffing. A prime location can enhance visibility and accessibility, which are vital for attracting clients and employees. Having a location close to clients and associates is most ideal.
When purchasing a resale, examining the existing lease agreement is fundamental. The new owner must ensure the lease can be transferred smoothly, with favorable terms that support the business’s long-term goals. It’s important to understand the terms and price of the lease, as it’s recommended to choose a lease that provides the option to extend so owners don’t run the risk of losing their business location. Before purchasing a resale, engage in a transparent conversation with the landlord for a seamless transition, and have a legal team review any contracts before committing.
Purchasing a franchise resale offers numerous advantages, including an established customer base, existing infrastructure, and a faster route to profitability. However, it also comes with its set of challenges, such as addressing any neglect from the previous owner and managing the limitations of the existing business setup. Before purchasing, prospective owners should also consider the brand’s existing presence, or lack of presence, in the community, and determine a marketing budget and strategy for brand development.
Prospective buyers should conduct comprehensive due diligence into both the Franchisor and local business being sold, seeking professional advice as they carefully evaluate all aspects of the business and its real estate. With the right approach and preparation, purchasing a franchise resale can be a rewarding and profitable venture, providing a solid foundation for future growth and success.
Aracely Melendez