Pros And Cons On Existing Franchises For Sale
Franchising is a brilliant business model, but a new franchise does not guarantee success. For most cases, it has proven efficacy in some areas under certain conditions. Due to this obvious failure of start-up businesses, another great option for entrepreneurs who wish to buy a franchise is a resale that is already successful. What are the pros and cons on existing franchises for sale?
Pros
1. Since the business is already up and running, franchisees can start earning income immediately. They will have customers and cash flow on day one.
2. They do not have to choose a location, build a site, or review demographic studies. New franchisees usually wait a year or more until their location is ready in order to start earning profits.
3. The existing franchise has a history. Franchisees can analyze actual financial data to determine whether a business will be successful or not.
4. The price is negotiable. New franchise usually comes in fixed terms and price. Also, the franchisor is rarely flexible. With a resale, it is possible to negotiate the price, trainings, payments terms, and other aspects of the deal.
5. It is easier to investigate a resale than a start-up business. An existing franchise allows access to the book and records of the company as well as its contracts and customer files. This will allow franchisees know the history of the business and take a peek of future.
6. Lastly, franchisees can interact with their fellows in the system. This allows them to conduct research discreetly in order to gain insight about the business and the franchisor.
Cons
1. Not all franchise companies promote the locations for sale. This means potential franchisees may need to research longer than they would in a non-franchise business.
2. Generally, the franchisor has the right to refuse to any individual franchises. Franchisees need to get information if they want to purchase or else they will go through an unnecessary negotiation as the business already has a buyer.
3. It may be difficult to get a third-party financer as better franchisors have relationships with lenders to help finance their new sales.
4. Lastly, franchisees may be required to complete a costly and time-consuming orientation before the franchisor gives the final franchisee approval. In this case, the franchisees will go through a mechanism that will extract them from the deal if they are not approved.
Pros
1. Since the business is already up and running, franchisees can start earning income immediately. They will have customers and cash flow on day one.
2. They do not have to choose a location, build a site, or review demographic studies. New franchisees usually wait a year or more until their location is ready in order to start earning profits.
3. The existing franchise has a history. Franchisees can analyze actual financial data to determine whether a business will be successful or not.
4. The price is negotiable. New franchise usually comes in fixed terms and price. Also, the franchisor is rarely flexible. With a resale, it is possible to negotiate the price, trainings, payments terms, and other aspects of the deal.
5. It is easier to investigate a resale than a start-up business. An existing franchise allows access to the book and records of the company as well as its contracts and customer files. This will allow franchisees know the history of the business and take a peek of future.
6. Lastly, franchisees can interact with their fellows in the system. This allows them to conduct research discreetly in order to gain insight about the business and the franchisor.
Cons
1. Not all franchise companies promote the locations for sale. This means potential franchisees may need to research longer than they would in a non-franchise business.
2. Generally, the franchisor has the right to refuse to any individual franchises. Franchisees need to get information if they want to purchase or else they will go through an unnecessary negotiation as the business already has a buyer.
3. It may be difficult to get a third-party financer as better franchisors have relationships with lenders to help finance their new sales.
4. Lastly, franchisees may be required to complete a costly and time-consuming orientation before the franchisor gives the final franchisee approval. In this case, the franchisees will go through a mechanism that will extract them from the deal if they are not approved.
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