Should You Open a New Franchise Location Or Purchase a Resale?

Partnering with a franchise brand allows entrepreneurs to open a business with a proven business model — a significantly less risky proposition than starting a business from scratch. But when buying into a franchise system, first-time franchisees often have the choice of opening a brand new location or taking over ownership of an existing location. While the latter option may seem like the safer bet, it has its downsides, too.

To help you determine which path is right for you, 1851 Franchise broke down the pros and cons of buying an existing franchise location versus starting from the ground up. 

Pros

Built-In Reputation

Buying into an existing franchise means you’re walking into a business venture with an existing reputation in the community — good or bad, people have an idea of what to expect from your store. If the previous franchise owners established a good reputation, then you’re in good shape. If not, you may have some extra work ahead of you to prove to the community that under new ownership things will be different. Buying a franchise location with a poor reputation provides you with an opportunity to improve it and showcase your offerings to the community in the best way you see fit.

Established Customer Base

An established location comes with an established customer base. Depending on the kind of business you’re operating, that customer base may have a relationship with the store and the staff who run it. Whether they’re a regular or a more infrequent visitor, it’s important to honor that relationship and give the customer a familiar experience when they engage with your brand. If you choose to buy into an existing franchise, make a point to build on that relationship with existing customers while you seek out relationships with new ones. 

A Staff That Knows the Ropes

Just like its customers, an existing franchise comes with trained staff who know how the business operates. This may alleviate the need for training staff. Plus, working with a staff that’s already well-aware of the day-to-day flow of business can help ease you into the transition, especially if you’re a first-time franchise owner.

Outlined Expectations From Existing Business

From the moment the previous owner hands you the keys, you will know what to expect from the business. The previous owner will clue you in on revenue expectations, marketing plans, the flow of store traffic and notes on employees. From there, you can figure out where you need to make improvements to run your business as successfully as possible.

Immediate ROI

The brunt of the upfront cost of an existing business is a little easier to swallow when you know that you will see an immediate return on your investment. There’s no ramp up time. As soon as you’ve completed training and gotten to know your staff, you enter a revenue earning environment.  

Cons

Resistance From Established Customers

Humans are creatures of habit, and that may make the transfer of franchise ownership a little bit difficult, especially in the case of customer-facing businesses like a restaurant or retail store. Happy customers are the bread and butter of any local business, and that’s why it's important to honor practices of the previous franchise owner’s practices while introducing your own. 

Problems With Existing Staff

Similar to a business’s customers, the existing staff likely has an allegiance to the previous owners and an understanding of the way they expect the business to run. If you’re looking to make changes to your store’s work patterns and operations, be sure to communicate them clearly to your employees, explain why you’re making them and show how they will improve business to avoid any issues. 

Taking on Existing Issue

Buying into an existing franchise can mean buying into existing issues, and you could run into some hiccups when trying to set things on the right track. Whether the store was underperforming, demographics have changed or competitors have come into the market it’s important to do your research and consider why the previous franchise owner has decided to sell. Additionally, if the business isn't operating at up-to-date standards, that could mean additional costs that you’ll need to take on.