5 Tips for Buying an Existing Franchise

Franchising presents a unique opportunity for individuals pursuing a path to entrepreneurship. By leveraging an operational plan that is true and tested, the chances of success increase. Buying a new franchise is one thing, but buying an existing franchise is an even simpler process.

Buying a franchise that is already established allows for business owners to jump right in instead of waiting for location scouting, real estate negotiations and openings. Here are five tips for buying an existing franchise:

Evaluate the franchisor Look over the FDD and the Item 19 of the brand. The FDD is touted as the Bible of franchising, so being familiar with the company, its history, its legacy and its future goals is worth the time studying.

Evaluate the franchisee Find out their story, when they joined the brand, why they’re leaving. Know the who, what, where, when, why and how. These are all important factors in making an educated and responsible decision when buying an existing franchise.

Evaluate the success of the franchise Knowing the revenue, sales and ROI on the location is vital. When considering your purchase, navigate areas of improvement (customer service, employee morale, etc.). This allows you to decipher if this is a good investment for the long term.

Audit Look over the accounting records and balance the books to ensure the information you were provided is accurate and up to date.

Know the risk factors A good question to ask yourself is, “If I purchase this existing franchise, will I be able to have a positive effect on its ownership?” Risks are great when buying any business, but knowing your position and the risks of the sale is a good way to combat them before jumping on board.