Beyond Origins the Discussion

Pros And Cons Of Buying A Resold Franchise, Not Starting A New One…

July 23rd, 2008

Franchising is a very easy way of starting a business. And if you want to have a shorter course even in franchising then think about buying an existing franchise. It involves buying a franchised unit that is already running. But as with any other business, there are many pros and cons to consider before you opt for the arena.

The Pros of buying an existing franchise
• Since it is already established, you do save a lot of time in starting your business. You do not have to look for locations, build or renovate the property, advertise your business; in short you get rid of many of the headaches associated with opening a new business.

• You do not need to build a customer-base, as the franchised unit has its own band of loyal customers. All you have to do is see how you can increase the traffic.

• Getting financial backing will be easy as banks will deem the project risk-free, as it already has an enviable track-record.

• You are not required to train the staffs; instead you get staffs who know every bit of the business. Moreover, if you have any problem, they can guide you in the right way.

• The cash register will be ringing from the next day of opening, as very few customers get bothered if their favorite store changes hand. You can keep the service as it was or you can even make it better and the customers will come back frequently.

• You may be good at marketing and selling products and services, but not quite adept in setting up an operation and designing it. Here, purchasing a resold franchise can be a great option.

• What’s more, the franchisors themselves are often willing to sell an existing franchise.

The Cons of buying a resold franchise

• Many a time, the seller does not divulge in details about the problems the business is facing. In that case, you will inherit all the troubles and face problem while running the unit.

• The franchisor may not be co-operative and that was the reason the franchised unit was sold in the first place.

• The market might have been great, but now declining or has become oversaturated.

• A nearby anchor-store that drew lots of people has closed affecting the business or may be the new road-construction is diverting traffic.

• The franchising concept may be excellent, but the particular franchising location has a bad reputation.

• The upfront-fee can be higher than regular starting-fee of the franchise.

In order to avoid making such mistakes, research very well before getting into any kind of deals. Learn properly about the market, talk to other franchisees to know about the franchisor as well as to the customers to know the kind of reputation the unit has. Maybe the location is suffering because the previous owner did not follow the instructions of the franchisor very well. In that case, a change of management can make a vast difference, if other factors regarding the business are favorable. This kind of business is definitely the best possible bargain. But, don’t forget to take your lawyer with you when you read the papers. Make sure you have not violated any clause of the franchisor. In conclusion, it can be said that buying an existing franchise is better than starting a new one and the best way to purchase it is to approach the franchisor itself.

brandEXPANSION associates can help you determine whether buying an existing franchise is right for you.

Entry Filed under: Legal