Pip Wilkins, CEO of the British Franchise Association, gives you the inside track
Starting a business can sometimes seem like an uphill battle. Even starting a franchise may seem daunting and will undoubtedly take a while to reap any rewards, certainly financially. This is why franchise resales are becoming increasingly popular.
There are many reasons why a franchisee may be looking to sell their franchise. Perhaps they’re ready to retire, maybe they’re looking to move and are unable to take the business with them or it could be that the franchisee chose a franchise that is simply not for them.
This is something that is important to look into when considering buying a franchise resale. If you do your due diligence when searching for the right resale, the benefits can be great.
A huge plus to buying a franchise resale is that you will have access to the history of the business from its opening to its current operations. This allows for plenty of data to analyse, giving you a rounded picture of the condition of the business and whether it’s sustainable to buy and carry on operating.
The accounts of the franchise will allow you to view its track record and give you an understanding of its performance, as well as whether the projections provided by the franchisor are realistic when compared to the past financial reports of the business.
Has the business been stable financially? Has it continued to grow within the market? If the franchise has been trading for long, you will have a lot more background to make a definite and confident decision.
Starting a franchise from scratch can take a long time to see a financial return, in most cases taking up to a year or longer to take home a salary. However, when taking over a franchise resale you’ll have cash flow from day one, as the business will already have an existing customer base and presence in the local area.
That, coupled with brand recognition, will provide a great customer base, as the brand will be known locally as well as nationally - perhaps even globally - depending on the franchise.
Remember, if you plan to take over a successful franchise, the only way for it to remain a prosperous asset is to put your heart and soul into it, ensure that you continue to provide an excellent service and make the correct managerial decisions. If you don’t, your reputation could be tarnished and all that hard work building the business before you came along could be undone.
Foundations in place
There are other benefits of purchasing a franchise resale too. You will have fully trained staff and a leased primary location fitted with all the necessary equipment. Having these existing foundations in place will no doubt take a massive weight off your shoulders.
Putting in place the infrastructure of a business is always a difficult task and takes a lot of time, energy and money, so having staff who already know some of the local customers, as well as a pre-established business, will make the transition a lot easier.
Sharing your vision
There can be some challenges that will come with a franchise takeover, including concerns among the team who are not sure what the transition will bring. Early reassurance can turn these worries around.
Showing a vision for the growth of the company, and where staff can help with development, can motivate the team and bring about positive results. You will need to earn the respect of staff through communication and the right attitude, so convey your passion for the business you have just taken over.
Being able to put your own stamp on a business and watch it grow can be incredibly rewarding. It’s not unusual that a resale happens because the franchisor require fresh blood to revitalise the business. Obviously, it would be a bad idea to take on a franchise that is failing, but to take on one that has potential to flourish will be great for someone looking for a business project.
Do your homework
There are risks in any business venture - nothing’s guaranteed to be a success. You will need to do your homework into the franchisee you’re hoping to buy from, as well as the franchise itself, including accreditations.
You should go about buying into a resale franchise with the same amount of research and caution as you would if you were to set up your own business or franchise from scratch.
Having the ground work in place and a pre-existing customer base, talking to the previous franchisee looking to sell and the franchisor itself and seeing the success and potential growth of the franchise could be the incentive you need to take the plunge and acquire a franchise resale.