Buying a franchise “resale” means buying an existing franchise license from the current franchisee. You have the same safety net you would have if you were starting the franchise new; corporate is going to train the new owner and the location is already established.
Go into this with your eyes open. There’s a reason the current owner is selling. Understand that reason, the historical performance and reputation of the location and how the seller valued the business assets.
You might also consider buying an existing non-franchised business. In this case, you don’t have that corporate safety net to rely on, but like buying a franchise resale, you can jump into the driver’s seat of a vehicle that’s already moving.
Whether you are looking at a resale franchise or non-franchise business, the risks are similar.
Advantages to buying a business resale
- The business already has a location, equipment, and inventory.
- There may be an existing customer base, though there is no guarantee customers will transition to a new owner.
- There is an existing workforce. Before making the purchase, you will want to know if employee training is up to date and if there have been any staffing challenges.
- You can draw from historical data when applying for financing.
- The business already has a presence and reputation in the marketplace.
Disadvantages to buying a business resale
- A successful business that is turning a profit typically costs more than starting a franchise.
- There may be a mismatch between what sellers and buyers think the business is worth.
- You might inherit deadbeat staff or employees resistant to changes you want to make.
- The business may have outstanding debt.
- If the business has a bad reputation in the market, that can be very difficult to overcome.
- Successful, profitable businesses are usually sold through inside deals. The best businesses for sale are never listed.
The biggest challenge to buying a highly profitable established business is they tend to sell very quickly. The businesses you see listed for sale are often problematic or overpriced.
Your best chance at these opportunities is working with a business broker. They can alert you to opportunities before they are listed.