1851

Investing in an existing franchise can save you some of the ground work involved in business ownership. However, there are a few important strategies that you’ll need to know to effectively navigate the resale market, make informed decisions and maximize your potential opportunities.1851 Franchise spoke with&nbsp;<a href="https://www.linkedin.com/in/lisa-plonka-cpa-cfe-95a25a15/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=navigating-the-resale-market-a-buyers-guide-to-acquiring-existing-franchises-2725844" target="_blank" rel="nofollow">Lisa Plonka</a>, assurance partner at&nbsp;<a href="https://www.plantemoran.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=navigating-the-resale-market-a-buyers-guide-to-acquiring-existing-franchises-2725844" target="_blank" rel="nofollow">Plante Moran</a>, about the key considerations prospective buyers should keep in mind when they’re considering purchasing an existing franchise in the resale market.<h3>Evaluating an Existing Franchise</h3>First and foremost, you’ll want to decide on an industry in which to start your search. Plonka suggests taking your education and work experience into account to see if a given concept matches your skillset. If you’re unsure where to look, enlist professional help.“Franchise brokers can help align your strengths and operating style with a particular brand,” Plonka said.Once you have found an existing franchise that suits your background, you’ll need to do some thorough research to determine the potential of the concept and the likelihood of your success.“Look at the long-term viability of the franchisor, considering factors including their franchisee opening and closing statistics, key financial ratios and overall trends in their particular industry. This can be done through a review of their Franchise Disclosure Document (FDD) or other publicly available sources,” Plonka said. “Closely evaluate the historical financial performance of the location(s) you are looking to acquire compared to the franchise system overall.”If you find data that is less than positive, that doesn’t necessarily mean you should pass up on the opportunity. Dig deeper to try to understand the root of the poor performance or issues. According to Plonka, this can help you decide if there is an opportunity for improvement with the location or if the market simply does not have an interest or need for the brand.&nbsp;Another area of consideration when evaluating an existing franchise in the resale market is the requirements that will be placed on you by the franchisor should you invest.“Understand current and future capital needs, such as the franchisor’s required schedule for remodels, equipment replacement or other immediate cash needs of the business that you might step into,” Plonka said.&nbsp;Plonka advised asking questions about the lease or real estate arrangement, as well as the existing staff members. You’ll want to know if you’re expected to assume an existing lease under your new ownership and if you’ll need to negotiate new terms. You’ll also need to know the status of the current employees, including whether they’ll transition with the sale and how viable finding replacements will be if they don’t.<h3>Acquiring an Existing Franchise vs. Starting a New One</h3>There are a lot of factors to consider when acquiring an existing franchise. In fact, you might be thinking it would just be easier to start from scratch with a new franchise location. In reality, however, there are pros and cons to both sides.“Opening a new location of a franchise can be a lengthy process between selecting a site, preparing an existing building or constructing a new building to the franchisor’s specifications, hiring employees, etc,” Plonka said. “Purchasing an existing franchise business offers a turnkey solution.”Although acquiring an existing franchise offers some advantages with systems set up and ready to go, it does come with some uncertainty. Plonka explained that it’s important to gain clarity on any transfer fees and who needs to pay them, whether or not you’re starting a new franchise agreement or taking over the existing agreement, any applicable terms of renewal and opportunities for expansion in the future.&nbsp;<h3>Common Pitfalls To Avoid in the Resale Market&nbsp;</h3>Entering into an existing business comes with its complexities, and there are many common errors in the franchise resale market you’ll want to avoid. The first is a lack of understanding of franchising in general.“If buyers have not worked in a franchised business before, it’s critical to understand how the franchise model works, including what you can control and what is regulated by the franchisor,” Plonka said.Plonka also suggested that new franchisees take full advantage of the support offered by the franchisor — including training, marketing support and transition guidelines — to make the process easier. Failing to leverage these resources is a common pitfall and one that is easy to avoid.Another resource that many new franchise owners overlook is the existing franchisees with the brand.“Current franchisees are an invaluable and often untapped resource to new franchisees, as they can provide market insight, an overview of current challenges, and resources that have helped them succeed,” Plonka said.&nbsp;<h3>Strategies for Identifying and Negotiating Profitable Opportunities&nbsp;</h3>Acquiring an existing franchise offers an excellent avenue to entrepreneurial success if you know how to navigate the resale market. Once you understand the general process and are ready to start your search for an available franchise, bear in mind these tips for identifying and negotiating the most profitable opportunity: make your interest known and enlist the experts.“If there is a specific brand the buyer is most interested in, they might consider reaching out directly to the franchisor to find out if they know of any franchisees looking to exit the system,” Plonka said. “As in all business acquisitions, it’s critical to lean on the support of trusted advisors who have direct experience with franchised businesses. Legal advisors, accounting professionals and capital providers can ensure all aspects of the purchase agreement, franchise transfer, entity structuring and financing are properly handled.”Interested in learning more about franchise ownership? Check out these resources and stories:<ul><li><a href="https://www.1851growthclub.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=navigating-the-resale-market-a-buyers-guide-to-acquiring-existing-franchises-2725844" target="_blank" rel="nofollow">1851 Growth Club</a></li><li><a href="https://1851franchise.com/20-fast-food-franchise-opportunities-2024-2725122#featured">20 Fast-Food Franchise Opportunities to Explore in 2024</a></li><li><a href="https://1851franchise.com/3-reasons-why-you-may-want-to-consider-multi-franchising-2725286#industry">3 Reasons Why You May Want to Consider Multi-Franchising</a></li><li><a href="https://1851franchise.com/franchising-basics-what-is-a-franchise-agreement-2725476#columns">Franchising Basics: What Is a Franchise Agreement?</a></li></ul>

Buying Existing Franchises: How to Navigate the Resale Market

1851 Franchise

Within the world of franchising, the resale market can offer some very lucrative opportunities, but only if you know how to navigate the complexities of it. 

Navigating the Resale Market: A Buyer's Guide to Acquiring Existing Franchises

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Busy Bee Jumpers

Bouncing Into Business: Meet Kayla and Jason Leonard, Busy Bee Jumpers’ New Franchisees 

Bouncing Into Business: Meet Kayla and Jason Leonard, Busy Bee Jumpers’ New Franchisees in Rhode Island

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Navigating the Resale Market: A Buyer's Guide to Acquiring Existing Franchises

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