Many people dream of being their own boss and reaping the many benefits of owning their own businesses. However, starting a business from scratch can be daunting. You have to come up with a concept, a brand, form a business entity, obtain intellectual property protections, find a location, and much more. In many cases, instead of building a new business from the ground up, many people decide to purchase a resale franchise. These are businesses that have already been developed and have been in operations and the owner wants to sell for one reason or another. There are pros and cons to purchasing a resale franchise and the decision should be carefully weighed with the assistance of an experienced business attorney.
When you buy an existing franchise, the business model has already been determined and tested. Any past hiccups should be documented in the trade history of the franchise so you can identify what works and what doesn’t for that particular model.
Most resale franchises have an established brand that is recognizable and has significant value already. In addition, any business you are considering buying should already have an established customer base and marketing strategy.
Finally, a resale franchise will come with all of the equipment needed to run the business and often the physical space for the business. In addition, some may come with a fully trained staff that will remain under the new leadership. Having knowledgeable staff can help avoid any interruptions in operations.
The most obvious risk when purchasing a franchise is that the previous owner wants to sell the business due to a drop in profitability. To ensure that an owner is not selling a franchise due to inadequate financial performance, you must have an attorney conduct due diligence prior to the purchase.
In addition, some franchise’s have set franchise periods and for a resale franchise, this period of time may be shortened. This is only one example of possible complications to consider when purchasing a resale franchise.