Interested in running your own business with low levels of risk? Buying a franchise resale could be for you. Here’s why.
Franchising is on the up. In the UK, it generates more than £17 billion for the economy ‒ a figure that has risen by at least 14 percent since 2015 (BFA/NatWest). Also, there are more than 48,000 franchise units in the UK, and six in ten of them see a revenue of over £250,000.
More and more entrepreneurs are taking advantage of the security and support provided by the franchise system ‒ but there’s a way to reduce risk even further. By investing in a ‘franchise resale’, you take on an established unit when a franchisee decides to retire, relocate or pursue other interests. You just pick up where they left off.
5 Benefits of franchise resales
Some people relish the challenge of launching their own franchise business – or even an independent start-up – but there are many benefits to buying a previously owned franchise unit.
Here are five of the biggest advantages when it comes to investing in a franchise resale.
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1. You’ll have accurate financial forecasts
If you set up your own franchise unit, you’ll have an idea of the brand’s reputation and whether it has a good track record. Plus, the franchise disclosure document will provide some information on how other units in the network are performing. But it’ll be hard for you to predict exactly how well your new business unit would fare in your specific location among its local population.
Franchise resales eliminate this uncertainty. If you’re taking on an existing business, you’ll have access to the previous franchisee’s actual financial statements. Although they’re not a guarantee of the income you’ll see, they’ll provide a good indication of how the business is likely to perform.
Having this information to hand will be invaluable when you come to write your business plan and secure funding.
2. The business premises will already be kitted out
The process of setting up a new franchise unit can be taxing; in most cases, you’ll need to rent a business premises and renovate it to company brand standards. Depending on the industry you join, this can take a long time, and you’ll need to project manage the set-up.
Unless the franchise resale business you take on needs a little TLC, you’ll be able to start trading straightaway. In the worst-case scenario, you’ll probably only need to do some quick renovation work.
3. You’ll have a ready-made customer base
Depending on the industry you join, it’s likely you’ll inherit a pool of loyal customers eager to return to the business on a regular basis. Even if this isn’t the case, there will almost certainly be existing awareness of the brand in the local area ‒ especially if the unit is based in a visible location.
As potential customers will already be aware of your business in the local area, you won’t need to spend as much money and energy on marketing in the initial stages. Although this factor may not seem particularly noteworthy, it’s a huge plus point, as certain forms of promotional activity such as billboard, radio and television adverts can be extremely expensive.
Having an existing customer base will also save you the time and effort involved in attracting new consumers, so you’ll be able to dedicate more hours to developing your business.
4. You’ll have a workforce of experienced staff
If the franchise unit has been generating a healthy profit, it probably has a solid team of dependable employees already in place. The previous franchisee will have put in all the hard work recruiting and onboarding suitable workers, and providing training to develop their skills. You’ll be able to save a significant amount of time by skipping this step.
What’s more, not only will the staff be knowledgeable and skilled, but they’ll also have a good understanding of the business, its strategies and its values. While you would usually have to dedicate time to going over the business’s operating procedures and vision for the future, your workforce will have this information already. So, your franchise unit will be able to run at maximum efficiency from the get-go.
5. You’ll have an established supplier network
Some franchisors give franchisees a list of approved suppliers to make sure the product range is consistent across the business network. New investors must work out how much of each inventory item they’ll need for their unit and make contact with the suppliers to arrange the buying plan. And if the franchisor doesn’t specify suppliers, the franchisee has to start the process from scratch.
Franchise resales cut out these steps, as the new franchisee can just continue with the previous owner’s supplier plan. You’ll know how much of each item you’ll need to order, and how often, which makes life a lot easier in those initial stages.
People looking at franchising should consider a resale because of the fact that the business is already trading, so there are customers from day one, there’s cash flow from day one, there is brand presence in the marketplace from day one, and, if it’s appropriate to have staff, then there will be staff in the business from day one.
– Derrick Simpson of Franchise Re-Sales Ltd
>> Read more:
- 5 Advantages of Franchising for Young People
- 9 Things to Know Before Becoming a Franchisee
- Mythbusters: Common Misconceptions About What Makes a Successful Franchisee
- 5 Great Reasons to Become a Franchisee
- Franchising 101: Are You Ready to Become a Franchisee?
- Franchising 101: 6 Things to Know Before Becoming a Franchisee
Buying a previously owned franchise business
The five main benefits of buying a previously owned franchise unit will save you a lot of time as you start to run your business. They also have the potential to reduce your outgoings, although you may find you cover much of the costs in the franchise resale buying price. In return, you’ll have the luxury of being able to walk in and get up and running almost straight away.
The advantages listed above contribute to one key factor: you’ll be able to reach your break-even point much sooner than you would if you launched a franchise unit from scratch. So, you’ll make a profit in a much shorter space of time and boost your revenue in the initial stages.
See our catalogue of informative articles for more advice on starting a business in the franchise industry.
Alice Tuffery, Point Franchise ©