What To Remember When Buying A Franchise Resale
The franchise market in the UK has really developed and matured over the years and therefore the franchise resale industry has become an increasing occurrence. As well as the conventional benefits of franchising, training, support and use of a proven business formulae, when purchasing a franchise resale you are able to take advantage of already established trading accounts and of course an existing client base, but this comes at a premium. Here we discuss some of the key points to remember before buying a franchise resale.
Reason For Sale
In many situations there will be more than one reason for the franchise resale, it is important that you understand why the franchise is being sold. More often it is because the franchise owner is retiring after many years of running a successful franchise business, they may be moving from the area, they may be unable to continue with the business, they may have decided that it is not the right business for them or they may be even capitalising on the large sale figure they will receive for selling it.
Attentiveness Before The Buy
Being attentive is so important when considering a franchise resale, ask as many questions as you want, speak to as many franchisees as you can, read franchise publications, get advice from accountants, solicitors and go to as many trade associations, until you feel comfortable and assured that buying the franchise is right for you.
What Type Of Franchise Resale Should I Consider?
A franchise resale is normally more expensive to buy than a newly established franchise. This is because often the resale will be established in the area with its own clients. There are excellent opportunities in relatively new franchises and they offer excellent profit margins and are less expensive to buy than the more well-known franchise resales like McDonald’s or SUBWAY.
Challenges You Could Face
One of the main challenges when buying an established franchise is the cost – it is more expensive to buy an established franchise than a start-up. You will have to pay for this privilege – this is paid to the owner for establishing the business, recruiting the staff, marketing and advertising for the franchise. You will have to ask the right questions to ascertain the reasons for the sale and if those reasons are legit. Speak with locals and see if the shop is well known in the area.
Financials Of The Fanchise Resales
The financial information will only be given to you after you sign a non-disclosure agreement. This should give you an indication of how well the franchise is performing or not as it may turn out. It will give you the essential information of expenses or areas where you may be able to make a saving. In some instances their overheads may not be applicable to you, which would increase the profit available to you when you purchase.
Many franchises have been green lighted by the major banks and in most cases it is easier to raise the funds to buy a franchise than it is to raise the capital to start or buy a small business. Banks with special franchise financing sections include NatWest, Lloyds and HSBC.