Resales

Franchise Resales will offer many advantages over an established business for sale, purchasing an established franchise resale will offer instant cash flow from day one, as opposed to a new business venture which in some instances can take anything from 12 to 18 months before returning a profit. With an established franchise resale, the business will have an existing customer base of clients using its service and products.

When you invest in a franchise resale, you are investing in a proven business format, which has products and services that have sold successfully over a given length of time. You will have trading history to learn from and to support your calculation for the future.

A new franchisee can profit from the brand identification that a franchise resale specifies. A new business can take many years to establish a brand in a competitive area. There are no guarantees that the consumers will identify with the brand as a product leader. A franchise resale can also provide owners with instantaneous brand recognition.

It can be exceptionally expensive for an independent business proprietor to advertise their business, whereas a franchise resale has the advantage of already having an existing marketing campaign in place. The franchisor will have agreed a marketing campaign to ensure customers identify with and remember the brand. Belonging to a franchise reduces marketing costs, which are shared equally with other franchisees in the network.

The risk element of acquiring an established franchise resale is a lot less than acquiring a business for sale, for all of the above reasons. So why is the existing franchisee selling? There are no precise reasons although the following are commonplace:

• The franchisee has had many profitable years
• The franchisee may not be able to fully commit to the business
• The franchisee has become bored and is looking for a fresh challenge
• The franchisee may wish to relocate

The value of the resale will vary on many factors, and different methods can be used to value the franchise resale. The most common method is a multiple of the profit; the multiple used can be anything from 2 to 8 times profit. The more recognised the franchise brand, the greater the multiple used. Other factors contributing to the value of the resale will be: staffing structure, historical trading accounts, does the franchise business have contracts with major clients, is the franchise resale in a prime location. Franchise Resale will usually cost more than an independent business for sale in the same sector. As with any investment, do make sure to do your due diligence thoroughly, contact a franchise solicitor, speak to Banks and other professionals involved in the resale process.

For further advice and guidance contact Jess Bains MICBA of Franchise Sales and Resales on 01462 685 633 or email jess@franchisesalesandresales.com.