Why investing a bit more in an established franchise business could suit you better than starting from scratch
‘Resale’ is a term used in the franchising sector which refers to an established franchise that is being sold on. A franchise resale comes at a higher price, but with an established reputation, customer base, team of employees and a guaranteed revenue.
Many individuals looking for a franchise business opportunity are looking for a start-up, but some may instead consider a resale opportunity if they can’t find a new territory in their chosen area, or realise that their strengths lie in growing a business and a team.
Why do resales come about?
Resales are part of the business cycle of any mature franchise network. Franchisees come to a point in their journey where they may wish to retire, move onto something different, or realise their investment. Most franchise networks in the UK will have a number of resale territories available at any one time.
Resales often bring enthusiastic new faces into a franchise network who are invested in the brand and will help achieve further growth, both for the franchisor and themselves.
How is a resale valued?
A franchise resale is valued on a multiple of the operating profit of the company, representative of its success and turnover. You’re investing in a business that the previous owners have dedicated years to establishing and building up to be profitable and successful. As such, franchise resales require a larger initial investment than start-up franchises, although financial help is available.
Many banks are supportive of the franchise sector, due to the very high percentage of successful businesses. Resales also have a track record in the form of a proven profitable turnover, an existing team and an established client base, meaning banks will look favourably on lending, even when it’s at a higher level and sometimes over a longer franchise term.
Resales also come with a franchise fee and ongoing royalty fees, as franchisees access the same level of franchise support as start-ups.
How does the franchisor fit in?
As a franchise, the business you’re investing in is part of a network. The franchisor wants to invest in someone who will continue to grow the brand, mutually benefitting their franchise network as a whole as well as the individual.
When a franchisee decides they want to sell their business, the franchisors may become involved to ensure the business is sold to someone who aligns with the company’s mission and ethos. If you’re a good fit, you’ll continue to achieve success. Many franchisors help to advertise and market resales, as well as recruit new owners.
Like many franchisors, Home Instead guides franchisees from the very first day of their journey until their last, ensuring that when the day comes, a franchisee’s exit from the company is well supported.
This is considered all part of the franchise journey, and Home Instead actively encourages each franchisee to consider their goals from the beginning, including their exit strategy.
Franchisees who are looking to sell are provided with a wealth of support from HQ, helping them to realise their investment while also being certain that the business is being handed over to someone who shares the same ethos and mission.
What are the benefits of a resale as opposed to a start-up?
Resales are perfect for someone who has run a business before – or held senior roles in large corporates – and looking for an investment to develop further. You may want to buy a resale in a growing market or sector and manage a steady, profitable business.
However, if you want to experience the highs and lows of starting your own business, you may be more suited to a start-up franchise, where you can be more hands-on with its initial development.
A resale franchisee ideally should be able to engage with and manage people straight away, as the existing team will already be established and have their ways of working. They must have a very clear vision, ethos and culture that aligns with the franchise network.
With a franchise resale, you get all the positives of buying an established business, but with the added benefits of a full franchise support package and a well-known name.
Taking over an established franchise
Home Instead has been operating in the UK since 2005 and therefore has a small number of resale opportunities due to retirement.
Resales enable franchisees to snap up a desirable location where no start-up territories are available, and Home Instead currently has opportunities across the UK, including sought-after territories in the South East, South West, North West and the Midlands.
The resale opportunities with Home Instead are perfect for caring entrepreneurs who can see the market potential of providing quality care to an ageing population, as home care continues to become the care model of choice. Support is provided from day one, with new franchisees benefitting from an 80- strong national office team offering help with everything from marketing to IT support.
Ruth Brown is director of business development at Home Instead.