Guide to Buying Another Franchise: Define Your Why

When it comes to buying another franchise, one important thing to keep in mind is your “why.” This means considering your motivations and objectives behind purchasing the franchise.

You should answer the question: What do you hope to achieve through this investment? Whether it's financial stability, career advancement, passion for the industry or other personal or professional goals, evaluating your "why" helps ensure that the franchise aligns with your values, interests and long-term aspirations. 

1851 Franchise spoke to Liz Leonard, franchise advisor and author of “Your Franchise Fast Pass” for advice on how franchisees can determine their “why.”

Determine Your Reasoning for Expansion

When thinking about expanding a franchise, there are a few common motivations. One is that they may want to avoid having neighboring franchisees — especially if it's a lucrative territory in terms of demographics and population.

“It’s important to research that opportunity long and hard before you jump in and buy another territory,” Leonard said. “If you're going to expand the territory, you want to make sure you are in a position to expand not just geographically, but that you’re also able to expand your working capital. Do you have money allocated for this type of expansion?” 

Expanding typically involves investing in additional resources for the business such as another location, possibly a larger fleet of vehicles, employees, and more insurance.

“You have to do a mini business plan and forecast forward,” Leonard said. “Does this make logical sense? Will you see a return on your investment over time?” 

Is Now The Right Time? 

A practical approach must accompany any motivation to grow and expand, says Leonard. When thinking about expanding your franchise, make sure it's the right move and not just something you want because it's new. 

Your current territory may be sufficient. Do a detailed financial analysis to see if the expansion makes sense. Talk to successful people in the same business for advice, and get support from experts in your field. Also, consider how you'll handle the current shortage of workers before making any decisions.

“The dream of having multiple locations is something many franchisees consider, but it needs to be evaluated to the right level and you must have the right team in place,” she said. “You may have a dream to buy this other territory, but do you have that hand-selected team who’s going to run it the way you want? Are they in place to execute your vision from an operational and marketing perspective, as well as from a fiscal standpoint?”

Expanding to another territory without proper staffing can lead to significant problems, such as being unable to serve your customers effectively. Providing quality service is crucial, but you must also ensure you can afford to pay your team. It's a balancing act between expanding and maintaining quality service. The motivation to expand is to increase revenue, but you need to carefully assess whether the new territory will be as profitable as you hope.

Decide Whether It's The Right Fit

When purchasing another franchise, it is crucial to thoroughly evaluate the companies you are considering.

"We have emerging brands, some that have been around for 25 years, and franchisors at what I call the 'mature level,'" Leonard said. “It's really important to understand the differences between these options.” 

To mitigate risk when considering franchise opportunities, assess whether you're a good fit for an emerging brand. Evaluate how well it aligns with your goals, risk tolerance, financial investment, and security. Study the industry broadly and then delve into franchising specifics. Consider factors like your market, the franchisor's story, and the company's financial track record to determine if it aligns with your business aspirations.

Before deciding to become a franchise owner, it's important to consider whether the franchisor's culture aligns with your future goals. A good way to do this is by speaking to current franchise owners to gain insight into the daily operations of the business, including its culture, financial aspects, training, and support.

"This culture fit isn't something you can just address at the franchise corporate level," explained Leonard. "You will have a good understanding, but it's important to thoroughly interview at least eight to 10 franchisees to find out: Do they resemble me? Can I model myself after them? Do they have similar goals to mine?"

Take Lessons from Your First Experience

Before deciding to acquire another franchise, franchisees should carefully reflect on their initial experience. Leonard says to ask yourself, “Would I do it again? Was I successful? What would I do differently?” This introspection serves as a compass for future endeavors."

"Before making any large investments seek advice from your mentor or financial advisor, whether it's someone at the franchisor level or your personal CPA. It's important to ensure that any expansion is well-planned, as the consequences of not doing so can be quite daunting. Don't rush into new territory without carefully considering the potential impact." 

Finally, when considering all these options, it's crucial to thoroughly assess past performance, financial stability, and your capacity to manage your business effectively. Drawing on past experiences and seeking guidance from mentors and financial experts can help ensure a successful expansion. The goal is not just to grow, but to do so in a sustainable and manageable way.

Every great franchisee had help buying a franchise. Want to learn more about how 1851 helps franchisees find the right franchise opportunity? Visit www.1851growthclub.com and start your journey.