Recycled Franchises...Why Buy 2nd Hand?

by Pamela Gold

Looking to start a business? Reviewing your options? If franchises sound appealing, you may have an alternative option you hadn't thought of before: Buying an already established franchise.

It turns out that 10 to 15 percent of franchise sales may actually be franchise re-sales. Franchisees sell their business for many reasons. They might decide it is time to retire, or they might have been so successful that they'd like to sell their extremely profitable business and move on to their next challenge. Some franchisees are not happy in the industry they have chosen and decide it is time to work in an industry that interests them more.

Why do people choose to buy a franchise that is already established?

• Potential to get to profitability quicker.
• Income from day one.
• Public acceptance and an established customer base.
• Ease in making financial projections.
• Starting with trained staff.
• Starting with established suppliers.
• Less of the "pains" you might experience with a start-up, such as finding a location, interior remodeling, and developing a client base!

When buying an already established franchise, there are steps you must take to educate yourself before you make a decision to actually buy:

• Do your homework when it comes to pricing! You will have to figure out what the true value of the business is. Keep factors in mind such as leasing fees, length of lease, location, etc. These are important factors and can make or break your profitability. Also, you will probably have a larger upfront investment, because you will be buying the goodwill of the business.
• Trace economic trends, and in particular, trends within the industry you are planning to buy into. Even if the franchisee is able to offer you figures from last year, the market can drastically change from year to year.
• Do your research about the franchise! Call franchisees and find out what they have to say about their businesses.
• What kind of reputation does this particular franchise have? Talk to other franchisees, and speak to customers. Make sure the business has the type of reputation you would be proud to own.

You've made the decision to buy a franchise, which is one of the safest ways to own your own business. By considering the option of buying a previously owned franchise, you will be able to skip the difficult start-up period, which most business owners go through.

Perspective:
Improving on an Established Franchise

Carl Dissette is mindful of the fact that any concept, even one as powerful as Jimmy John's Gourmet Sandwiches, requires an owner's hard work to make it grow. He bought an existing Jimmy John's in Glen Ellyn recently, for example, and realized that the previous owner had done little to capitalize on the catering and delivery business that is a major component of most successful Jimmy John's. If a driver was not available that day, for example, the store simply wouldn't do deliveries. "Now we have a driver come hell or high water for deliveries," he says. "Some days, I drive. Whatever it takes." Sales at the Glen Ellyn store are up 25% this year from a year earlier, Dissette says.

Additional Destinations:

In England, take a look at http://www.whichfranchise.com, which is an affiliate of the British Franchise Association. Here you'll find articles and information about franchise re-sales.

Pamela Gold is the Marketing Coordinator at Franchise Solutions Corp., based in Portsmouth, New Hampshire. Her primary responsibilities include the creation of original content on FS's web site, bi-weekly newsletter, and client ad pages.