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What to Look for When Buying an Existing Franchise for Sale
If you’re in the market to buy your own business, investing in an existing franchise can feel like getting a head start. You’re stepping into business with a brand that’s already established with real-world performance you can assess instead of just projections on a spreadsheet.
Unlike a startup founder, you’re taking control of a business that has systems and relationships in place, and its own momentum. But it helps to know how that foundation was built so you can keep growing it as you move forward with your new franchise.
There are over 3,000 franchise brands in the USA, and franchise employment is on the rise. That represents huge potential opportunities for savvy buyers, but only when purchases are made with forethought and proper planning.
Learn what questions to ask to get a clear view of the business, and make buying an existing franchise a smart, confident step into business ownership.
Table Of Contents
- Understand Why the Franchise Is Being Sold
- Review the Financials That Drive the Business
- Evaluate the Strength of the Territory
- Know What Your Franchise Agreement Allows
- Assess the Systems, Processes, and Support in Place
- Check the Brand’s Reputation and Customer Relationships
- Understand Staffing and Daily Operations
- Clarify Exactly What You Are Buying
- Plan for Transition and Hidden Costs
- Decide If a Franchise Resale Fits Your Goals
- How to Move Forward With Confidence
Understand Why the Franchise Is Being Sold
Every franchise resale has a story behind it. In many cases, this can be tied to the owner’s personal situation and plans, rather than the success of the franchise. Some people want to relocate. Others are retiring. For some business owners, it’s just time to try something new.
However, there may be occasions when there is a franchise-related reason the owner is selling. Understanding the story behind the sale helps you understand exactly how this business has been run and what kind of transition you can expect.
When you know what’s ahead of you, it’s easier to picture yourself stepping into the business and steadily building on what’s already in place.
Review the Financials That Drive the Business
Once you know the “why,” start to ask about the “how.” How is this business succeeding, and how has its performance fluctuated or grown during its recent history? Looking at the financials gives you an advantage over most new business owners. You don’t have to rely on projections to see exactly what revenue is being generated.
Look for patterns and averages rather than being disillusioned by a bad year or overly optimistic because of a good year. Ask how the owner is paid and what expenses there are, so you fully understand how the overheads work before you take control.
Learn to see these numbers as the story of how the business operates. It’s not a scorecard; it’s what could make the difference between your choice to buy or not, based on how this financial opportunity aligns with your goals.
Evaluate the Strength of the Territory
Another aspect to consider is where you’ll be working and how far that territory extends. Some franchises are fixed while others offer services that cover several neighborhoods, townships, or even cities.
It’s important that you take some time to understand the size of your potential new territory. Ask if there’s room for expansion and see if you can get a glimpse at what types of customers you’ll be serving. Assessing the current (and potential) territory helps you plan marketing efforts and staffing needs, planning for long-term growth with confidence.
Know What Your Franchise Agreement Allows
The franchise agreement is basically a framework for how the business operates. It sets guidelines for growth and also highlights any limits. Review the franchise agreement carefully so you understand what functions are already in place and working, and what flexibility you have as the new owner.
Pay particular attention to how long the agreement runs for, including how to renew your agreement in the future, and how any transfers are handled.
» Also read: What Is a Franchise and a Franchisee in Business?
Assess the Systems, Processes, and Support in Place
One of the strongest attractions of buying an existing franchise is being able to step right into systems that are already up and running. These systems might include how work is allocated and scheduled, how customers are served, or how you and your team manage daily operations.
Discuss processes with the current owner and find out exactly how much support you can expect from the franchise organization.
Check the Brand’s Reputation and Customer Relationships
A positive reputation can be one of the most valuable parts of the business you are acquiring. Research how the business is perceived locally, including how customers interact with the brand. Strong relationships and consistent, positive feedback often reflect a service or brand that customers trust and will return to over and over.
A strong reputation now can give you a glimpse into the future; you can build on this customer trust to grow your business and expand the reach of your franchise’s brand.
Understand Staffing and Daily Operations
It’s also important that you get to know the people you’re working with and how they’re involved in day-to-day operations. Take a look at current staffing roles, responsibilities, and schedules. Don’t forget to ask about hiring and firing processes, as these may become an essential aspect of your growing business.
Understanding staffing helps you get a clearer picture of how hands-on you need to be and when you can take a step back. Make sure buying a franchise aligns with your work goals. If you want to cut down the hours you work, you’ll need reliable people around you to help with that.
Clarify Exactly What You Are Buying
You also need to know exactly what type of business you’re buying into and how much of it becomes yours. A franchise is more than a brand name and a location. Find out exactly what tools, systems, and equipment come with your purchase.
This is how you get a sense of the value of your opportunity. If you spend a small fortune obtaining a franchise, but then still have to pay for expensive equipment, it will take longer for you to make your venture profitable.
Plan for Transition and Hidden Costs
Just because a franchise is well-established doesn’t mean there won’t be a transition period. Plan for what happens while the business changes hands.
Consider training and onboarding of new personnel, the transfer of expenses and other financial concerns, plus how much time you can allocate to the new business immediately.
Decide If a Franchise Resale Fits Your Goals
Not every business buyer has the same priorities. Some want to buy a franchise for the promise of a steady income. Others are excited to run their own venture and see it grow.
It’s time to take a step back and reflect on your short- and long-term goals. Does this franchise align with what you want to gain from business ownership? Think about how much you want to be involved, day to day, and what support you’ll need.
How to Move Forward With Confidence
Remember, the decision to buy a franchise or not requires a little research and preparation. Get to know the business you’re buying, its territory, and how ownership transitions are supported by the brand.
If you’re ready to look at WIN franchise opportunities, you can explore multiple options and see what fits best. Book a free consultation with our franchise development team now.
