Should You Open a New Location or Purchase an Existing Franchise?

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. Both options have their pros and cons, and which one to choose will likely depend on the individual circumstance of the specific franchisee. 

The Advantages of Buying an Existing Location

Buying into an existing franchise usually means a faster turnaround. For one, 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. Hopefully, that reputation will be good, and the existing location will also come with an established customer base. 

Just like its customers, an existing franchise will likely come with trained staff who know how the business operates. This can alleviate the need for training and can help ease franchisees into the daily operations, especially if they are a first-time franchise owner.

Another big advantage of resale locations is the amount of information available. The previous owner will be able to 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.

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.  

Brad Burgess is an Ohio-based owner of the residential and commercial painting brand Fresh Coat* Painters. Burgess opened his first location, a new territory, in the Medina County area of Ohio in late 2020 but continued in his corporate insurance position. Soon, Burgess says he realized he couldn't put in the necessary time he wanted because of his career. So, he decided to double down and purchase an existing location in the nearby Hudson territory in order to build up his business and make it his sole focus. 

“Most franchisees may expand because they are doing really well and want to buy up existing competition, but I was the exact opposite,” said Burgess. “I needed stability, and I knew purchasing an existing territory that was already thriving could help me make this business my life. I met with the original Hudson Fresh Coat owner and made him an offer two years ago. We talked back and forth and came to an agreement. Hudson is one of the leading organizations in the Fresh Coat system. That's the nice thing about franchising — having other franchisees that can help you succeed.”

The Advantages of Opening a New Location

Opening a brand new franchise location may be a bigger risk, but it can also be more rewarding as it offers owners the opportunity to start fresh with a shiny new business in the community. Although it may be more work to get the business off the ground, franchisees don't need to worry about how the previous owner ran things, any negative customer experiences or bad habits on the side of the staff. And nothing brings customers in faster than a grand opening or a first-to-market store. 

Similarly, when building a brand new franchise location, owners can be confident they are getting the newest and most up-to-date model the franchisor has to offer, whether it be state-of-the-art equipment or innovative technology. Oftentimes, franchisors will roll out revamped models for new locations but keep existing locations as they are.

Additionally, while it will depend on a case-by-case basis, new franchise locations can potentially be less expensive because owners aren't buying existing cash flow from an established customer base. 

Steve Isom is the executive vice president for Stonebriar Auto Services, LLC, and a multi-unit Jiffy Lube franchisee focused on building Jiffy Lube Multicare locations across the country from the ground up. With 34 Jiffy Lube Multicare locations under his belt, he knows a thing or two about opening a new location. So, what is the secret? He says the key to opening new locations all comes down to real estate.

“I spent the first couple of years putting together a plan, as well as finding and securing locations,” said Isom. “The Jiffy Lube franchise model gives franchisees the option to work with one of their preferred developers when building a new location. The developers help you find great sites and streamline the construction process, but I am still the one who chooses every piece of real estate for a new location. This allowed my team and I to focus 100% on store operations and customer service.”

Overall, the decision to buy a new or existing franchise comes down to a franchise owner’s personality, preferences and risk threshold. If a franchisee is looking for a safe investment and a quick turnaround, buying an existing location is likely the right bet. But if they want to bring something fresh to their community and break new ground, then opening a new location can be a rewarding experience.