What Are the Risks in Buying an Existing Franchise Resale?

The pros to buying an existing franchise include a built-in business reputation, an established customer base and a trained staff, while the cons include resistance from established customers and potential issues from existing staff members. 

When an existing franchise is seeking a new owner, there is typically a reason why the previous franchisee is looking to step away. They may not want to make their business risks clear during negotiations because it would weaken the appeal to a new owner.

Additionally, if a new franchisee decides to make an existing business practice their own, they risk distancing themselves from already-established customer loyalty. They also risk upsetting their existing employees who suddenly have to adapt to new ownership.

When purchasing an existing franchise, it's important to evaluate the franchisor, franchisee and the previous success of the business in order to make an educated and responsible decision.

Overall growth of a collective franchise will at least provide an outline of the general risks associated with the business. If those risks are met with immediate solutions by a new owner, they could be in a prime position to establish an existing franchise after a changing of the guard.

The extent of business risks can be revealed through the existing owner’s motive for leaving, however, and it may not be identified until a new owner takes over the reins.

Often, these concerns are best evaluated on a case-by-case basis. Some industries will benefit from transitioning from one franchisee to the next, while others might benefit from a new franchisee that establishes their location from scratch.