Is A Franchise For Sale A Good Deal?

Many people who are in the market to start their own business wisely consider going with a franchise.  That’s usually smarter than starting a business from scratch, as a lot of the kinks have been worked out, and you’ll be getting the advantage of a well known brand name with a proven track record. 

And franchises have a much better track record of success than new, independent businesses.  So it’s easy to see why franchises are so popular.  But what about, instead of buying a brand new franchise directly from the franchising company, you stumble upon an existing franchise for sale?  Is that a good idea?

Well, it certainly can be, but that doesn’t mean it always is.  You’ll always want to do your homework before buying any franchise, but you’ll want to do some extra fact checking before buying an existing franchise for sale.  Because now you’re not dealing with just one party to a business transaction, but two separate entities.  One big factor in your decision is why is the franchise for sale to begin with?  If the owner died, and his or her heirs don’t want the hassle of running it, or are selling it to close probate, that’s one thing.  But if the owner is alive and well, you’d best find out exactly why they’re selling, and do your best to verify their story.  Franchises are usually pretty profitable, and profitable businesses don’t go on sale that often.

So you’ll need to examine the books, and you’ll also need to have your lawyer and accountant check the books out, too.  You have a right to know how much income is coming in, and what the profit margins are, and if the owner is hesitant to let you have this information, that’s not a good sign.  By having your lawyer and accountant run the numbers, you’re protecting yourself against a well hidden fraud you might not be able to spot.  Then you’ll need to check with the franchising company, too.  They’ll have to approve the sale to you, for one thing.  For another, the franchise agreement with the original owner may contain clauses allowing the parent company to raise franchise fees upon sale of the business.  So get all the facts.  A franchise for sale can be a great deal, but you’ve got to do your homework.