Investing in a franchise resale as opposed to a new franchise unit could give you the chance to inherit an established customer base and turn a profit quickly. But these valuable opportunities can be few and far between, so how do you go about finding one in your local area?
Before we dive into our seven top tips, let’s take a closer look at franchise resales and find out why you might consider buying one.
What is a franchise resale?
A franchise resale occurs when a franchisee sells the franchise unit they’ve invested in and built up. A new investor pays a premium to buy the business from them and keep it up and running. The buyer then becomes a franchisee and the seller moves on to other projects.
An existing franchisee may choose to sell up if they want to retire, relocate or focus on other interests. They may have also set up the business with the intention of selling it on for profit after several years.
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Advantages of buying a franchise resale
- Accurate financial reports and forecasts – When you invest in a franchise and set up your own business unit, you have data from existing branches in other locations to inform your financial projections. But if you take on a franchise resale, you have precise reports showing you exactly how the business performed in its location, so the information is even more reliable.
- Ready-made customer base in the area – Most franchises give investors the chance to tap into an existing national or regional customer base. But those who buy franchise resales know there’s already a solid pool of clients already involved with the business they’re taking on.
- Experienced staff – When you buy a business, you usually inherit its workforce, so you don’t have to spend time and resources recruiting and training staff. Your team will already know what it takes to run the franchise unit and should be able to continue working without a hitch.
- Enter a market with no room for new businesses – Sometimes, it’s not viable to launch a franchise unit in your chosen territory because the market is already saturated. But by taking on an existing business, you side-step this issue, so you don’t have to lose out if you’re interested in running a franchise unit close to home.
Initially I was worried and concerned about buying a failing and non-profitable franchise. However, two years later I have now tripled the turnover and it is generating significant profits each month. It goes to show you shouldn't judge a book by its cover! – Mark Sadleir, Window to the Womb franchisee & winner of the BFA-HSBC Multi Franchise Award
Top tips for finding a franchise resale in your local area
So, how do you begin the process of finding your ideal franchise resale in your local area? Here are seven great tips for getting started.
- Network – Whether you’re looking for a franchise resale or just an investment opportunity, it’s worth mingling with people who have already made it in franchising. Look out for local business events or chat with other franchise unit owners. Once you’ve established a connection, let them know what you’re looking for and they may be able to use their contacts to give you a lead.
- Know what you want – If you have a specific idea of the type of business you’d like to take on, you’ll be able to focus your search. By narrowing down your choice, you’ll be able to save time by researching the areas that interest you and homing in on the franchisors who may be able to help.
- Get in touch with franchisors – Once you have a list of the franchises you’re interested in joining, you should make contact with their franchisors. There are two benefits to doing this: you’ll be able to ask them about upcoming resales and get a sense of the franchise’s culture and how they do business.
- Use online search tools – There are plenty of websites out there advertising franchise resales and they often let you refine your search and provide handy tips for finding your perfect opportunity. It’s worth checking these sites regularly to pounce on the best deal when it crops up. Again, you can save time by having a clear vision of the franchises you’d like to join and where you’d like to operate.
- Do your due diligence – Making any decision in the business world should involve due diligence. Don’t just assume you know your local area inside out and have the insight to make a business successful. Before you jump into any franchise resales, take time to research the opportunity in detail, read up on franchisee testimonials and take the final two steps listed below.
- Visit the franchisor – If you completed tip three, you should have already been in touch with your chosen business’s franchisor – but don’t be nervous about organising a second meeting. Taking the opportunity to discuss everything involved in taking on an existing franchise unit and running it according to the franchisor’s guidelines is a vital step.
- Speak to existing franchisees – Before you sign on the dotted line, spend some time getting in touch with other franchisees in the business’s network. Find out whether they are glad they joined the franchise and how quickly they were able to turn a profit. Also, you might like to ask if they have any advice for new recruits. They have no reason to keep anything from you, so you should be able to get a true picture of the business by taking this step.
New franchisees will also tend to have a higher level of fear (a great driver); selling franchisees have a higher level of apathy (great limiter). The new franchisee will listen more intently to the franchisor and implement more of the key activity required to grow the business than the outgoing franchisee. – Nigel Toplis, MD of Bardon Group
Franchise resales on the market today
Here are just four fantastic franchise resale opportunities out there today. As you can see, franchisees sell businesses in all sectors and with a variety of investment and working hour requirements, so there should be something for everyone.
- Kumon – If you’d like to operate a Kumon Archway Study Centre in North London on a part-time basis, you’ll need to invest £37,500. Once you’re on board, you can expect to see a turnover of at least £55,000.
- Merry Maids – Investors based in North Wiltshire have the chance to take on a cleaning franchise unit for £190,000. It generates a turnover of more than £367,000 and profit of just under £70,000.
- Metro Rod – If you’re interested in running a plumbing business in North Scotland, you can buy a Metro Rod franchise unit. The asking price is £250,000.
- Énergie Fitness – Exercise fanatics can buy a thriving gym business in Lisburn with this franchise resale. You can expect to make a turnover of £361,000.
>> Read more:
- 5 Tips for Developing Your Employees into Future Franchisees
- Being a Successful Franchisee Means Adopting an Entrepreneur Mindset
- 7 Common Habits of Successful Franchisees
- Mythbusters: Common Misconceptions About What Makes a Successful Franchisee
- Five Tips for Boosting Your Self-Confidence as a Business Owner
- Traits of an entrepreneur
For more information, see our catalogue of informative articles, covering all aspects of the franchising world.
Alice Tuffery, Point Franchise ©