Shopping for a new franchise business and considering your options?  One you might not thought of is the concept of buying a “resale” franchise opportunity. There can be several advantages to buying an existing franchise instead of a new outlet, one being the established track record of profitability by the seller of the current franchise. 

Generally, it is can be somewhat difficult to find existing franchises that are for sale, depending on what business category you desire. In many cases, the franchiser holds the first right of refusal of the existing franchise, so the franchiser is notified of any intention to sell by the franchisee. 

Statistics show that on average, businesses change hands within five years. This is not to be interpreted negatively, as there is a wide array of situations that can lead a franchisee to sell his or her location. Retirement, relocation, health reasons, family, and lifestyle changes are all common reasons why a franchise unit may be for sale. After all, every wise business owner has some sort of a time table for an exit strategy.

 Here are just six of the benefits that come with the purchase of a franchise resale: 

Appraising the value is easier to perform and analyze. You have concrete, historical sales and profit and loss data at your disposal, providing you the necessary information to make an accurate forecast about the future performance of the franchise. 

The franchise resale is fully equipped and ready to go. You can literally close on the sale of the business today and unlock the doors to let customers in tomorrow morning.Pre-existing loyal customer base. When you buy a new franchise, your purchase decision is based on the sales and profitability of other franchise locations, but there is no guarantee regarding the performance of the new unit. With a resale, however, you have the luxury of knowing what to expect.

Attractive pricing. New franchises are offered at a pre-established, set price with little or no room for negotiation. Because a resale may be on the market for various reasons, such as personal or financial, it is within the realm of possibilities to purchase the business at below-market value. The franchisee might be flexible dependent upon the circumstances.

Time and Money Savings. The resale will come equipped with existing employees, suppliers, equipment, and operating systems.  This saves your budget for other areas, such as additional marketing and advertising.  You save valuable time by having seasoned employees who are efficient at what they do, so your training time is reduced substantially.  And your franchise has pre-existing business relationships with suppliers and vendors. 

Potential for buyer financing from the franchisee.  A resale might be easier on the wallet, as compared to the burden of the initial investment of a start-up franchise.  

Franchisers typically don’t prefer to have company-owned locations, so they like to maintain a database of potential franchise buyers.  An established, successful franchise resale may be a great option to consider.  

As a franchise consultant, I regularly work with franchise seekers looking for new start-ups, as well as re-sales. In addition to helping those looking for a new location, I maintain a regularly updated list of franchise re-sales in various categories and geographical locations.  Your preference is dependent upon your unique circumstances. 

Register for your Free Franchise Consultation. The Franchising Authority will help you find your perfect franchise!

Cory Barber is a professional franchise consultant affiliated with the world’s top franchise broker network. His free, confidential consulting services help guide you through the entire process of purchasing a franchise based on your background, skillset, lifestyle, and financial goals. For more information about his free Franchise Consulting Service, please visit: http://www.thefranchisingauthority.com or contact Cory at his office: 877-271-4305. Article Source: http://EzineArticles.com/?expert=Cory_Barber

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Significant numbers of established franchises are offered for re-sale in the franchise industry.  Owners sell for a variety of reasons such as: cashing in for retirement, spouse job relocation, family circumstances, health issues, other business interests, narrow margins because of poor management and banker pressure.  These present opportunities for buyers.  In our 2009 economy asking prices are down and terms are loose.  

 In view of the huge industry size, only one out of one hundred franchise establishments for sale equates to 8,500 franchise businesses on the market.  According to a 2009 PricewaterhouseCoopers LLP report prepared for the International Franchise Association, there are more than 850,000 franchise establishments.  Price Waterhouse puts franchise jobs at 9,578,000 and economic output at $835 billion.  These are real numbers.  The IFA is the preeminent voice and acknowledged leader for the industry worldwide. The Small Business Administration puts the number of franchise concepts (brands) above 2,500 and lists 1,065 in their Franchise Registry.  The SBA Registry lists those franchise systems whose franchise agreement has been pre-approved by the SBA, thereby shortening the loan process and ensuring consistent eligibility decisions. 

Due to our down economy income for many franchises has dropped significantly.  This has had a dramatic impact on prices and terms.  Business owners are pricing their establishments to sell.  Bank financing practically dried up during the worst of the economic crisis and severely limited the number of potential buyers.  Previously, seller financing was not offered and when it was negotiated, it seldom went above 20 per cent of the purchase price.  Now, sellers are practically acting as bankers.  Seller financing is common and ranges up to 50 per cent of the purchase price.  

It’s a buyers market.  If you are considering buying a franchise resale and have a nest egg of cash, you will find some very willing sellers.  The question is, are you willing to take a calculated risk in order to position yourself for exceptional profits as the economy recovers?

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You have finally decided that the time is right to buy a franchise business. You have already researched the pros and cons of buying a franchise versus starting your own business. How do you make sure that you choose the right one for you?

A decent franchise will not only be a good idea, it will also be an idea that is under constant development. Find a franchisor that is committed to improving and developing the concept so that it can keep pace with their fast moving competitors.

Before committing to any franchise ask the following key questions:

What training is included within the initial franchise fee? Does the franchise provide you with a comprehensive operator’s manual? Do they have training videos that you can watch in the comfort of your own home?

Does the franchisor offer proper telephone support? Can you call them out with office hours in an emergency? Do they have a decent internet forum where you can chat with other franchisees?

Is the product or service a good idea? Do you think you will be able to market it? Is there decent demand out there in your local marketplace? What are the unique selling points compared to their closest competitor? Will you get an exclusive territory?

Will the business fit in with your lifestyle? Can you work the hours required within the business? Who will cover for you when you go on holiday? Will you enjoy managing the business? Never start any business just because of money. Find a franchise that you will enjoy operating and then you will not dread going to work every day.

Bear in mind that a franchise is like any other business in that it will take time to start making money. How will you cope in the meantime? Do you have enough slush funds to keep paying the bills until your new business starts generating an income?

Speak to your accountant and get him to check out the figures for you. It is always a good idea to get a second expert opinion and who better than somebody that looks at facts and figures all day, every day? At the same time, ask your bank manager what he thinks of the idea. If your bank manager and your accountant both think it is a good idea, it probably is!

How are the royalty payments calculated? When and how often do you have to pay them? Are they within the normal range or are they excessive? Are there any other ongoing payments you need to make? Many franchises charge a marketing levy for national advertising so make sure you check this out.

Read your franchise agreement carefully before you put pen to paper. Is it a fair agreement? Does it protect your rights just as much as the franchisors? A proper agreement will clearly spell out the franchisors obligations to you.

A franchise at the end of the day will only reward you if you put effort in. No business runs by itself. You should always be able to count on the franchisor for full support and guidance but at the end of the day, you will have to work within the business and grow the sales.

Do you think you have what it takes to manage your own business?

About the Author

Naz Daud – CityLocal Franchises Internet Business Franchise Franchise Business Directory Ireland Internet Franchises

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If You Are Considering Selling Your Business, Don’t Let a Bad Economy Stop You 

There is a rhythm and pattern ton life and to business.  The seasons and cycles of the plant world are generally well recognized.  In example, a plant sprouts, grows to maturity, flowers or produces fruit then withers and dies to decay and enrich the soil in support of the next cycle.   Businesses have their cycles also, but they need not die in order to benefit the next generation.   

The life cycle of a typical business begins with an idea or concept, the start up or grand opening, continuous fine tuning and adjustment until things seem to be running smoothly.  At this stage business is good and, albeit financially rewarding, not as exciting as previously.  Eventually, essentially all business owners come to the stage where the business begins to interfere with how they wish to live their lives and they begin to have thoughts of selling the business. 

Many never act upon these thoughts for countless reasons and as a result less than 25% of small businesses and franchises are ever sold.  This is indeed a tragic statistic but it gets worse in a down economy, not because of the economy – but rather because the decision was not made to sell at the time it was supposed to have been during the normal cycle. 

A Time to Grow and a Time to Go

Perhaps I can explain it this way.  There is a time to grow and if you are not focused on growth – it’s time to go.  There is no status quo. Either grow or go.  There comes a time in every business’ cycle when a business owner should make the decision to sell and sell to the entity that will take the enterprise to the next level. This time can be recognized as when the demands of the business begin to conflict with an owner’s desired lifestyle.  This optimum time or Window of Opportunity to sell at an optimum price does not last very long.  

When the decision to sell is postponed in favor of waiting out a bad economy, the window of opportunity will often close and business cycle’s end game begins and the business’ value begins to diminish.  This end game is not one designed or controlled by the owner but rather one enabled by the outside forces created by allowing a business to coast. 

When that window of opportunity passes we generally find the owner just going through the motions and allowing the business to coast or, more accurately stated, slide.  Decisions to invest in the business are postponed or rejected.  Eventually, and often, very quickly the slide accelerates with the end game no longer controlled by the owner.  Much of the value of the business has been dissipated.  At the end, either the business is “Sold” to a competitor (at the value of selected assets) or closed and the assets liquidated.  

A Down Economy Intensifies the Usual Seller’s Market

Selling more than 2,000 businesses through good times and bad over the last thirty years has taught us that good businesses can and do command premium prices in down economies and here’s why:

• Layoffs, company closings and down-sizing flood the marketplace with people wanting to buy businesses
• Pricing formulas do not change because of economies
• Most owners of good businesses postpone selling in a poor economy resulting in fewer opportunities for the increased number of buyers
• A business’s value is dependent upon its outlook for future profitability
• You can get tomorrow’s price today for your business if you choose a buyer who recognizes the opportunity your business represents and considers expectations of future profitability when assessing value.

In order to obtain an optimum price for a business, regardless of the economic condition, one must attract the type buyer who will recognize the opportunity the business represents.  In real estate, optimum value is determined by the entity that will recognize highest and best use of a property.  Business prices typically reflect an acquirer’s perception of future earnings under their ownership. Therefore, the optimum value of a business is determined by the buyer who recognizes the most opportunity the business represents.  A business can be considered worthless to one yet be worth millions to another.

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Most people ask, “will buying a franchise unit make you rich?”

My sole answer, “No – It WON’T.”  Why do I say that? Am I bitter toward franchising? No – I am a big fan of franchising! I believe in the power of economy of scale and exponential growth – they are the key to riches – both are present in franchising.

 With economy of scale, a franchisee enjoys better purchasing power – simple: 1 business ordering a widget gets different pricing to 100 business ordering the same widget in volume. With the exponential growth of your franchisor, you enjoy better exposure and brand awareness without doing a thing on your part! Neat-o! However, franchising has its drawbacks.

The not-so-good things about franchising – the benefits of franchising I mention above don’t come for free. In exchange of those benefits, you are obliged to pay a franchise fee (which has to be renewed after a certain period of time) and a royalty (or other forms of revenue). THIS is where people go wrong thinking that buying a franchise could make them rich. Buying a franchise is buying a cash flow – yes, you can get a healthy (and hefty) cash flow. You can enjoy a good lifestyle owning a well-run franchise unit, and also enjoy the exposure in your local area (which may also translate into more clients and cash for you). However, in my humble opinion, that’s about it, really. You can’t really get rich and financially free by owning a franchise. I agree what Yaro Starak of Entreprenerus-Journey.com said, that you will be rich AFTER you sell your business, not WHILE you run your business.

Why Franchising won’t make you rich – I believe you have heard stories about the acquisition of Feedburner, Blogger, and such – the owners are rich man, after their business sold. In other words, riches come in the form of capital gain, not cash flow. Cash flow keeps all gears working well, but capital gain buys you the engine.

This is why you should consider starting up your own business – Your franchise unit does have valuable assets – but not the most valuable one – the brand name. No matter how long you own your profitable franchise unit, the owner of the brand is not you – it’s the franchisor. If you eventually sell your profitable franchise unit, you sell assets PLUS goodwill (cash flow, good local image, etc) MINUS brand name value. And that’s not a number you would love to see by selling your business. In my opinion, the biggest selling point (and value) is your brand name – To have it, there is no other way but to own your own business.

The question remains – Purchase a franchise or start up your own business? My answer – if you value capital gain over cash flows, choose starting up yourself. If you prefer the other way around, choose franchising. Also, consider your skill set and entrepreneurial style – no one-size-fits-all solution here  One person can be a better franchisee than the other – this also applies to starting up a business. Choose what kind of entrepreneurship you want to do – it could take decades to find yours. So I suggest start choosing now, before you got too deep in something you don’t like later on.

 Ivan Widjaya on franchising.  Ivans owns http://www.noobpreneur.com  buy a franchise

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Franchise agreement: From a Noobpreneur Point of View*

Franchising is about getting the right business at the right location, right? Wrong! It’s about the franchisee agreement and the ability to stick to it. Therefore, franchising is not for everybody.

Franchising is for those who can follow set rules and comply with the franchise agreement. If you can live with it, you can succeed. If not, you’d better be opening your own business.

Franchising involves two totally different entities united in a common ground called franchise agreement. It would be unfair and biased to talk about franchising from one side only, whereas there are actually two sides involved – the Franchisor (the brand owner) and the Franchisee (the brand licensee). They are united by a franchise agreement. I’m not going to talk deep into franchise agreement, yet (maybe in my future posts?) What I am going to talk about is that the agreement filled and ’spiced’ with the rights and responsibilities of franchisor AND franchisee – therefore, it’s super important.

An agreement between two entities is usually needed due to the ‘contradictive’ nature of the two entities.An agreement is sealed to unite the differences. Franchise agreement is NOT partnership agreement. Alas, many people mistakenly believe that franchise agreement is partnership agreement. This misconception causes wrong expectations of the franchisees – they expect the franchisor to be equal partner with shared responsibility. Well, it’s totally wrong!

There are several basic differences between a franchise and a partnership:

• A franchise doesn’t share profit – it charges a form of royalty and marketing fee in return for support and branding. A partnership (licensing, business opportunities, multi level marketing, etc) – either equal or not – shares profit.
• A franchise doesn’t share risk – the franchisee holds the whole responsibility of the success of its unit, whereas the franchisor guarantees that the support and brand image are well taken care of. A partnership shares risk among partnership members.
• A franchise implements top-down approach – franchisees must comply and follow the franchisors’ guidelines. A partnership, as you might guess, determines who’s in charge by the amount of share owned in the partnership.
• In a franchise, relationships are enacted on set rules – again, in my noobpreneur term, generic relationship. In a partnership, relationships are negotiated – in my noobpreneur term, organic relationship.

A franchisee agreement is very important. Just like any other agreements, franchisee agreement is purposed to lay all rights and responsibilities on the table – to see whether they are the best fit for the franchisee and the franchisor. If you liked it, carry on. If you didn’t, bail out. This is important, because the latter disputes in franchising are mostly caused by the misinterpretation of franchise agreement by the FRANCHISEE – not the franchisor.
In many publications, franchisors are often blamed for the franchisees’ failure. Believe me, more often than not, it’s the franchisee who is a pain, not the franchisor. I’m a franchisee, I know what I’m talking about Yes – franchisors have their own bad, but the call to agreeing or not-agreeing on the agreement is on the franchisees. You sign it, meaning you understand it. Period.

Last words. A franchise agreement is not easy to understand – it’s often lengthy and boring
However lengthy and boring it is – the franchise agreement is crucial. About the length and complexity, the franchise agreements are set to regulate every single detail – to let potential franchisee fully understand what it takes to run the franchise unit. If the agreement was too simple, potential franchisees might see the franchisor is not serious enough to tackle potential problems. One word of advice – if you were not a good agreement reader, consider hiring a lawyer to translate the agreement into more casual language and warn you if potential problems are presented.
Ivan Widjaya, Franchise agreement reader

*Noobpreneur = Newbie Entrepreneur. I define a newbie entrepreneur as someone who is ALWAYS a newbie (first-timer) in his/her entrepreneurship journey. In other words, a noobpreneur is someone who try new things and launch new ventures with no regard to their background and knowledge.

Ivan Widjaja, Franchise believer, Owner/Editor of www.noobpreneur.com

Good advice to follow if you want to buy a franchise.

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From the franchisor side, franchising is a difficult yet necessary way to grow a business. I have a good relationship with my franchisor – the CEO of the Business Services Center. We share a lot about franchising. One time, he shared the following information. It broadened my insight on franchising.

Not all franchisors share the vision of ‘growing together.’ Many franchisors think about franchising as a vehicle to rapidly grow their business and assets – franchisee interests are lower priority. A better goal is for franchisees and franchisor to grow together, because if the franchisees succeed the franchisor will reap the result, too – better brand value and awareness, and strong franchise performance lead to many opportunities.

Franchising a business is not easy. Franchising seems like a good idea to expand a business – but it’s not easy. Although the cash flow is admittedly nice (in my case, the royalty fee is 5% of sales), almost all of it vanishes into R & D and marketing campaigns. The overhead in franchising is nose-bleedingly high – cost are sky high, and performances could be better. What gives? Mismanagement in the headquarters? Liability here is not only the franchisor, but also the franchisee – ‘bad’ and uncooperative franchisees slow progress and consume unnecessary resources. The impact is severe – the other cooperative franchisees and the franchisor suffer the consequences – lackluster support, damaged brand image and value, and lost focus. To ‘weed out’ bad franchisees, he had to splash some money to buy back the broken franchise units. His franchising strategy doesn’t include closing franchise units – buying them back is more viable, in his opinion, to preserve the brand image.

It’s simply not easy. If it is not easy, why insist on the benefit of franchising? Despite the problems, franchising is necessary, and a great, time tested, business strategy. The franchising route, rather than licensing or partnership route, incorporates the exponential nature of franchising. Exponential means covering strategic areas fast and outnumbered competitors – hence, achieving better brand awareness and exposure.

Franchising is at it best if the franchisor and franchisee can work well together. The power of franchising lies in the ability to agree on a common goal despite differences. McDonald’s – a classic story of a successful franchise – became one of the world’s leading franchisors due to its ability to work together with the franchisees.

Currently, my franchisor has more than 110 franchise units. My benefit as a franchisee? A brand image that is nationwide, and a profitable business, thanks to the effort of my franchisor.

Ivan Widjaja, Franchise believer, Owner/Editor of www.noobpreneur.com

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This is the place to share your tips, success, failure, trends, and insight regarding franchise resales.  Where to find good ones. Where to find financing.  What personal qualifications are needed to succeed. 

Your input is welcome.

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