Franchising is gaining popularity each year, and individuals who choose the right franchise can benefit from it greatly. The decision to start a franchise isn't a small one. It's something that requires a lot of work, time, and patience to get the ball rolling. If you're impatient and eager to own your franchise, then you might want to consider looking at a franchise resale. Here's a look at the benefits it offers.
What is a Franchise Resale?
A franchise resale is the process of purchasing an existing franchise business. The sale could take place through the company or the current franchise owner. It’s common for a franchise to be allowed to sell the business. In such a scenario, all details must be mentioned in the new franchise agreement. The franchisor should also be intimated about the same.
When you buy a franchise from an existing franchise owner, things could get tricky, mainly because it involves three parties. While your relationship with the franchisor will be long-term, the one with the existing franchise owner will last only till the agreement is signed. It’s important to get all the details in place, so there’s no confusion later on once the old franchise owner steps away. It’s also important to build a strong relationship with the franchisor and establish ongoing communication with them, so they can assist you while you settle into the business.
Why is the Franchise Being Sold?
One of the top questions you may have when looking into franchise resales is, “Why is it being sold?” Indeed, it’s an important query to ask when investigating your options. The last thing you want to do is take over a business that has no market value or requirement in the area.
However, there are some valid reasons why someone is selling their franchise. For example, the current owner could be retiring and wants to leave the business in good hands. Perhaps they are wanted to upgrade and start their own franchise enterprise. It could also be a matter of relocating to a new location and wanting to start a new branch in that area.
You may also find that they only wanted to reach a specific financial point in the business to make it competitive before moving on. Now, all these reasons sound good, but you might need to look a bit deeper. If you discover that the owner is selling the franchise due to poor performance or the contract’s regional restrictions, you may want to look for other options.
Make sure you do your research as a buyer to discover the reason for the franchise resale. Even if the business is performing poorly, perhaps you can find a way to improve it. It’s not all doom and gloom.
Advantages of Franchise Resales
A franchise resale comes with its fair share of advantages. If you’re not confident about starting something from scratch, taking over an existing business would be a smart way to get the ball rolling. If you’re still conflicted, here are a few advantages of considering franchise resales.
One of the major advantages of buying a franchise resale is that it already has brand recognition. We live in a fast-paced world, often ignorant of the changes around us. Starting a new franchise means waiting for people to recognise and get to know your business. The advantage of buying one that's already running is that people already know about it, having its social media pages, and it'll be easier to take it to the next level.
A lot of people believe the only reason a franchise would want to resell is because they're running a loss. That's not always true, though. There could be various reasons a franchise would want to resell, and the best part of buying one is knowing the reason for reselling. You get complete details of expertise, earnings, investments, and more. Also, when it's been running for a while, it's easier to predict future sales and growth, thereby eliminating the risk of walking into a business blindly.
Most franchise resales will require you to retain the staff as part of the agreement. This saves you the trouble of looking for and training new employees. Your business's success is determined by the kind of employees you have, and with a franchise resale, you get seasoned employees.
With franchise resales, you won't have to worry about starting your business from scratch. The minute your agreement is in place, your earnings begin. For example, if you purchase an up-and-running car wash franchise, it will have all the equipment, trained staff, and various upsell options to help your business get more profits. All you need to do is look for car washes for sale and see what's available.
All these factors together can contribute to generating a better turnover and allow you to focus on expanding the current business. With a car wash, you can add on a car repair facility or even a lounge area where you can sell refreshments for people coming in for servicing. When looking for Franchise Resale Opportunities in the UK, you should look for such businesses.
The nitty-gritty of a franchise agreement is always tricky. When starting a new franchise, you need various permissions and comply with local franchise resale laws. This can get overwhelming and frustrating at times. When you purchase a franchise resale, all this is handled by the previous owner. This means you need to follow in their footsteps, and you'll be on the right track. This makes your life easier and lets you focus completely on the business.
Are There Disadvantages to Franchise Resales?
While there are plenty of benefits of a franchise resale, it’s essential to stay aware of the disadvantages as well. One of the major red flags you need to look for when looking into a franchise resale is the poor performance of the business. Sometimes franchise owners try to break out of an agreement because it’s not doing too well. However, they still try to resell it at a high price.
You should also look out for competition around you because this will give you a clear idea of what you’re up against and whether your business will manage to sustain.
Look for the Perfect Franchise Resale Options
Owning something is a privilege only a few get to experience. Starting a franchise or purchasing an already functional one is a great way to get there. There's no denying that purchasing a franchise resale has various advantages over one that needs to be worked on from scratch. Apart from the time you'll save, it's also motivational because you will see money coming in from day one since people know and recognise the business. If you want your franchise business to grow faster, investing in a franchise resale is the way to go.
What is a franchise resale?
A franchise resale is purchasing an existing franchise business and taking it over to run as your own. This resale can take place between a franchise owner and you or the franchisor and you, depending on the circumstances. It helps you run your business without the initial struggle.
Can I sell the franchise I bought?
You can sell a franchise to a third party if you don’t have a ‘buy back’ clause in your agreement with the franchisor. If you do have such a clause, you have to first approach the franchisor and ask if they would be interested in buying the business. If not, you need their permission to sell to a third party.
Is it hard to sell a franchise?
Selling a franchise depends on various factors. If your business is not doing too well, it is going to be harder to sell it as compared to one that’s doing well. It’s important to highlight the USPs of the business and the future growth opportunities to make it lucrative for prospective buyers.
How do you value a franchise resale?
A franchise resale value is based on multiple factors. It’s often calculated using the EBITDA method. This is based on revenue, earnings before interest, taxes, depreciation, and amortization (EBITDA). The value can be about four to five times the value of the EBITDA. Make this as strong as possible and take your time to list down everything about the business.
Who pays the franchise owner?
The franchise owner is paid by the person currently running the franchise. This is a royalty fee that’s usually mentioned in the agreement. It helps maintain transparency with the franchise owner, who in turn offers ongoing support, branding, and more to help the franchise run successfully.
Can a franchise be transferred to another person?
A franchise is bound by an agreement and both parties need to hold their end of the bargain for it to be successful. To transfer the franchise to another person, a new agreement should be in place. This helps the terms to be clear and concise and the business to run smoothly without any conflicts.
What happens when you leave a franchise?
There are various things that can happen when you leave a franchise. Firstly, it’s important to dissolve, terminate, or transfer the agreement, bear all overhead expenses, and honour the terms of the contract. You can also choose to sell any existing equipment back to the franchise owner or to a third party based on what the agreement states.
Shaun M Jooste, Point Franchise ©