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Buying a Franchise Resale
Now is a good time to buy a franchise resale. why For many reasons. First, many franchises have been built and run successfully by their dedicated owners over the past 20 years, and now that baby boomers are entering retirement, their children may not want to continue the family franchise business.
Let’s face it, some kids grow up in those businesses, whether it’s KFC, Subway, or Jack-in-the-Box. They just don’t meet the expectations of the new generation.
Second, after watching their parents and family members work in various franchise systems, children “heard” the other side of the franchise when their parents came back after a long day of work and whined and grumbled about how hard it was getting and how tired they were. It was; They don’t want to be in the same shoes.
Yet precisely because these owners have built good businesses, it makes franchising more attractive to new entrants to a proven system as new opportunities are developed in lighter and regions; A brand’s maturity level and location can pencil in a great investment from the perspective of someone who is leaving the corporate world to become their own boss, or who is simply looking for a safe business investment. the first time. Others have saved enough for retirement and built up substantial equity in their homes, thus providing a good source of funds for a healthy down payment and short loan repayment schedule, which provides an adequate supply of business cash flow.
So I say, buy from proven and trusted brands and follow these tips:
1. Don’t overpay for business and keep the numbers real. If you’re not sure what a fair price is, evaluate the franchise
2. Do not pay for anticipated future earnings growth or unannounced cash sales; Stick to past performance and whatever extra you earn from your hard work is a return on that work and you should be compensated when you sell.
3. Finance the seller about 50% of the price you settled on; If he believes in his business location and franchise system, he should support you in that, provided you follow that proven system. You have to provide other collateral.
4. Do your due diligence and talk to other franchise owners in that franchise to test their own experiences; You’ll be surprised at how forthcoming they are with details
5. Weigh the return on your investment in a franchise versus other safe investments; Remember to add the build up in equity as you pay off the note as part of your analysis
6. Analyze all encroachment issues and take due care; Ask for the seller’s disclosure statement for further protection
7. Check franchisee turnover and customer feedback for that location to see where you can improve; After a while some franchisees put their stores on “cruise control” which is another indication that operational standards and customer service levels have started to decline. These are great opportunities
8. Determine the amount of time you will dedicate to that franchise system before burn out syndrome infects your own behavior and efforts; Then it’s time to get fresh blood and sell it, and so the cycle continues.
9. Recent adverse publicity and lawsuits may indicate a good buying opportunity. inquiry
10. Buy only a business that has good books and records and is presentable
In short, the biggest problem with buying an existing franchise is not doing your homework in the following areas:
Inaccurate cash flow analysis (owner compensation, debt service)
Paying much more than market value (a franchise appraisal can be a good guide)
Franchisors (Subway, Quizno, Schlotsky)
Inadequate comparisons of industry competitors and entrants (extreme pita a case)
Relying entirely on what your uncle says instead of getting an independent second opinion
Joining a franchise that is already mature and saturated, without territorial protection
Not interviewing a cross section of franchise owners and experts and keeping an open mind
Improperly structuring the deal as an all cash event, with no seller financing
There are plenty of good franchises out there for resale – get them!
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