How to Buy an Existing Franchise

When it comes to starting a new business, a franchise opportunity can certainly provide you with the right edge you need toward a surer way to succeed. There is, however, an even better way to go.

Instead of starting a new franchise from scratch, you also have the possibility of taking over an existing franchise. Although it will probably cost you considerably more, it certainly could save you from many possible startup headaches and give you instant stability.

By buying an existing franchise, you could have a proven successful business instantly in place with regular customers and a good cash flow. Because the business is already operating successfully, it will also be easier for you to get financing. You will also be able to look at the books and determine just exactly how profitable the business really is. Here are some tips on how to buy an existing franchise.

Find an Opportunity That You Like

When looking to buy an existing franchise, you want to find one that provides some service or product that you are genuinely interested in. Since you will be working the business for many years, you want to look it over carefully enough to know whether or not you think you could perform the necessary tasks for a long time. If you don’t think you could – then it probably is not a business you should get into.

Understand the Financial Situation

Learning about the actual financial situation of an existing business may be a challenge to discover, because the owner may not be willing to grant you the opportunity to actually look at the books.

You may have to work with other documents to try and figure it out and it still may not be clear.

Evaluate the Owner

Before a franchise can change hands, you will be spending a lot of time with the present owner. This makes it essential to be able to get along well with the owner – possibly for several months. In addition, if you are hoping for partial owner financing, it becomes even more necessary.

Calculate the Financial Need

In the process of evaluating the business, you will need to know what you are able to afford, and whether or not the owner will offer to finance any of it. Once you think you know what it is worth, you will want to make an offer.

Seek Owner Financing

Unless you have money to pay for the franchise, most likely you will need the owner to finance some of it. This is frequently done when franchises change hands as a way to reduce taxes. Lenders are currently financing smaller percentages of businesses. Make sure that you are able to have some cash on hand for modifications and upgrades where needed.

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