Franchise Resales: Buying an Existing Franchise

Business ownership is a highly valued professional choice in the current times. It is the preferred career option for experienced workers as well as novices who are willing to take risks and are passionate about entrepreneurship. The only roadblock in their path to success is the time to set up a business. Thus, they are inclined towards buying an existing franchise to start earning from the moment they take over the entity.

A fully functional franchise is part of a well-known network and is well-established in its exclusive territory. It has an existing commercial lease, customer database, equipment, stock, furniture and trained staff. Thus, franchise resales get a lot of attention from potential franchisees in Perth who want to skip the logistics part. So, here is everything you need to know about franchise resales to help you purchase an existing franchise. It will guide you to make the right decision and find the best deal.

Things to Know When Buying an Existing Franchise

The best part about buying a franchise is that they are present in every sector. Whether you are interested in beauty, restaurant, automotive or manufacturing, you will find franchise businesses operating in these segments. Here is what you must keep in mind before getting started.

1. Determine Your Budget and Look for the Right Business

The first step is to determine your budget before looking at the available opportunities by assessing the amount that can be borrowed and the remaining that can be gathered from savings. Buying an existing franchise becomes easy when you look online for the latest business listings in Perth. You can also get information about these entities in franchise events and social networks.

2. Find Out the Reason for Franchise Resale

It makes sense to look for stable franchise businesses that are getting sold for reasons other than failure and debts, such as retirement, ill health, family responsibilities, relocation of the owner, etc. It is vital to check the reason for the sale before embarking on due diligence.

You need to be cautious about units that are priced affordably but come with bad debt or challenging liabilities. It is better to avoid buying a failing business than trying to fix it. Also, you may find acquiring a highly profitable franchise hard because it will require a considerable investment. So, look at the pros and cons before taking the plunge.

3. Assess the Viability of the Franchise

After you have shortlisted suitable businesses for sale Perth that fit your budget and industry choice, you need to conduct their due diligence. Enquire about the business and get the franchise disclosure document that has all the relevant details. Look at the financial history of the parent brand and the unit for sale. Assess the stability of the business and learn more about the suppliers, customer base and employees.

Ask your accountant to assess the financial statements and cash flow of the franchise. It will also help you determine the ongoing expenses, such as royalties and marketing funds. Speak to other franchisees in the network to understand the work culture and training support the franchisor offers and enquire about challenges and disputes.

4. Determine the Cost of the Business

The seller often inflates the asking price because they are biased and need to leave room for negotiations. Thus, do not fall for the amount mentioned in the listing. Hire a professional accountant for business valuation. They must consider the trending market prices in the location besides calculating the cost of the plant and equipment.

The professionals are adept at evaluating intangible assets like goodwill and ascertaining the fair value of the franchise. Another thing to remember is that the outgoing owner must pay the franchisor a transfer fee. They may pass on this expense to the new owner. Thus, the transfer cost must be added to the total investment.

5. Start Negotiations and Get Trained During the Transition

After the assessments are over and you are confident about the potential of the franchise, you can begin with the sale negotiations. The seller must stay onboard during the transition, and the franchisor must provide the required training to become familiar with the daily operations and processes of the unit. The outgoing owner must introduce you to the suppliers, clients and employees to build a rapport and understand their expectations.

During this period, you must assure the employees, clients and suppliers about your commitment to the business goals and vision to retain them. Get all the documents and the contracts transferred and start operating your franchise.

The Advantages of Buying an Existing Franchise

Buying an existing business for sale in Perth has many advantages. If you are looking for franchise resales, you must know the following.

1. Minimal Time Spent on Business Establishment

The quickest way to entrepreneurship is to purchase an established franchise. You can walk in and take over the business because everything is in place and ready for operations.

2. Easier to Secure Funds for Franchise Resale

When buying a franchise for resale, it becomes easier to convince moneylenders about the repayment of the loan amount. The business has a proven track record and financial history that can be shared to secure government grants.

3. Instant Income Through the Existing Business

With a customer base in place, the buyer can start earning from day one. A positive cash flow ensures the business is healthy and continues to grow with the help of the franchisor’s support and policies.

The Disadvantages of Buying an Existing Franchise

Every Perth business for sale comes with the risk of hidden issues. Thus, potential franchisees must dig deeper and gather all the information before acquisition. They need to look for red flags, such as pending litigations, disputes with the franchisor, encroachment of exclusive territory by another franchisee, bad reputation and disgruntled customers. Evaluating the franchise should be a priority and must not be ignored to secure a profitable deal.

Wrapping Up

Franchise resale is a common way of moving out of the business for franchisees who wish to transfer the unit to another buyer. The opportunity comes with its set of advantages, but the buyer must steer clear of the disadvantages.