The Advantages of Franchise Resales: An Opportunity for Entrepreneurs
Franchise resales are a unique prospect for entrepreneurs looking to enter the world of business ownership. When it comes to franchising, there are two paths to ownership: acquire a new franchise business or buy an existing franchise business. Established businesses have several advantages, including an existing customer base, operational infrastructure, and a history of profitability. As opposed to starting a business from scratch, potential buyers acquire a business that is already up and running with a franchise resale. This allows entrepreneurs to skip the initial stages of setting up a business, which has the potential to make the transition to ownership smooth. Franchise resales are a great option for those looking to expand their business portfolio or for prospective franchisees looking for a ready-made opportunity for entrepreneurship.
What are Franchise Resales?
Franchise resales occur when an existing franchise business is put up for sale by its current owner. The process of buying and selling a franchise business is unique and there are special considerations to examine. There are a few restrictions with resales that include how to conduct the transaction and who can purchase the franchise resale. It’s important for both the buyer and seller to review the Franchise Agreement and all state and federal laws that apply before buying an existing franchise business. The Franchise Agreement contains vital information about the rights, options, and fees when transferring a franchise to new ownership.
Franchisors oversee transactions, have a first right of refusal, and approve potential buyers. The Franchise Disclosure Document (FDD) provides prospective franchisees with information about the franchisors’ business history, financial performance, litigation history, fees and expenses, and many other required details. The 23 Items disclosed in the FDD provide buyers with the information they need to make an informed decision when it comes to buying a franchise resale.
Franchise Resale Benefits
Buying an established franchise comes with all the traditional franchising benefits. From a proven track record and brand recognition to an established infrastructure and support from both the franchisor and the seller, franchise resales allow business owners to hit the ground running.
Proven Track Record and Support
One of the most prominent advantages of franchise resales is that the business comes with a proven track record. Buyers can evaluate the financial performance of the business, ensuring it has a solid history of profitability. Furthermore, franchise resales often provide ongoing support from the franchisor, offering guidance, training, and access to a network of fellow franchisees. This support system can be invaluable, particularly for first time business owners, as it provides a safety net and wealth of knowledge and experience to lean on.
Existing Infrastructure
When purchasing a franchise resale, entrepreneurs inherit an existing infrastructure, including equipment, inventory, and trained employees. This eliminates the need for costly start-up expenses and streamlines the operation process. This allows entrepreneurs to focus on refining operations and maximizing profitability from day one.
Lower Risk and Increased Potential
Compared to starting a business from scratch, franchise resales potentially offer a lower level of risk. A primary benefit of buying an existing franchise, as opposed to opening a new one, is it comes with an established customer base. Add to that an established brand and streamlined infrastructure, the uncertainty that can come with starting a new venture is minimized. With careful due diligence, franchise resales can provide a springboard for success. With a business that is already up and running, the opportunity for ownership comes with fully trained employees, an existing business plan, and defined operating expenses.
In today’s economic climate, there are financing advantages to buying a franchise resale, as lenders look to guard against any potential risk. With a proven business model, existing cash flow and proof of financial stability, funding a franchise resale may carry less risk than a new independent business. To learn more about franchises, in a wide variety of business categories, explore BizBuySell’s Franchise Directory to request more information.