These businesses are already established franchise units, FranchiseNote.com writes. A franchise resale already has a reputation within the market and community, as well as established financials and a customer base. While the prospect may seem ideal, there are a few issues that potential franchisees should consider before signing on the dotted line.
Potential franchisees should take time to examine the current franchise agreement. While looking at the business' financials is of paramount importance, investors should also consider the relationship between the current franchisee and the franchisor. How would it transfer to the next franchisor? What types of rules and regulations would they expect a franchisee to comply with? How an investor answers these questions is indicative of their future success, the site writes.
Franchisees should also look for a franchise resale that has just emerged from the franchisor's "incubator" - one that is fully compliant and well-aligned with the franchisor's strategies and requirements. If that is not possible, the site warns, franchisees should be careful - an established business system and culture can be resistant to changes and new policies.
The most important questions to answer concern the franchise's track record. Is it better to buy a franchise that has a great track record or one that is prime for improvement? To decide this, investors must understand why the current franchisee is looking to sell, the site reports. Is the franchisee bailing on a failing business or is the owner just ready to move on to the next phase of his or her life? And numbers don't always tell the whole story - the key is to investigate.
When a franchisee is ready to buy an existing operation, he or she will need to determine the value of the franchise and what he or she is willing to pay. This should be fairly easy because investors will be dealing with existing earnings, Entrepreneur magazine writes. While investors will have to pay more for more stable and profitable operations, remember that it has already proved to be worth the risk.
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