How to Buy an Existing Franchise
Buying an existing franchise can eliminate some of the hassles of starting a new venture. Though it may cost more to buy an existing franchise than start a new franchise of your own, the financial stability and customer base of an existing franchise is already proven. The process of purchasing an existing franchise is also quicker than starting a new franchise of your own.
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Instructions
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Find existing franchises for sale. Search franchise directories on the Internet and classified ads in newspapers to find existing franchises that are available. Narrow down which type of franchise you are looking to buy, and then locate a couple existing franchises you would consider purchasing.
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Meet with the current owners and get copies of the franchise's financial records. Review the financial statements of the existing business. Before purchasing an existing franchise, you must be sure the business is financially lucrative. Unless you are very savvy in the area of finance, it is best to let your accountant look over the financial documents.
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Talk to employees of the franchise. By talking to the workers at the existing franchise, you will get a better understanding of the day-to-day business activities of the franchise, and see if there are any glaring problems.
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Evaluate the location and market. Are there recent or upcoming changes in the community surrounding the location which may cause the value of the business to drop? Have there been changes in the product or service market that may cause a downswing in sales?
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Ask about financing. The current owner of the existing franchise may be willing to take a reasonable down payment and finance the remainder of your cost of purchasing the franchise.
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Have your attorney draft the sale documents. A franchise attorney will draw up a letter of intent, the purchase agreement, a bill of sale and any other documents needed to complete your purchase of the franchise.
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Tips & Warnings
Understand all the terms of the sale before signing the paperwork.
Do not skimp on hiring advisors. It is very important to have an accountant review the finances and an attorney to oversee the sale.
