January 6th, 2018 - Franchises Under 10k

Things to consider when you find an existing franchise for sale

If you are dreaming of owning your own business but are new to the entrepreneurial world, you may be thinking of buying a small existing franchise to get started. Finding a good existing franchise for sale can be really exciting. There are many reasons why buying a franchise that is already up and running can be just as good, if not better, than buying a new franchise business.

For many people, the main attraction is that you don’t have to wait to get started. As with any franchise, not every business is a good opportunity, so you will still need to do your homework to ensure you make a good investment. It is also advisable to take legal advice before proceeding with your purchase. In this guide, we consider the advantages and disadvantages of buying an existing franchise.

Browse our list of existing franchises today and find your perfect new business opportunity.

Advantages of considering an existing small franchise for sale 

Whether you are looking at a large or small franchise for sale, these are some of the reasons that you may want to consider buying an established business:

Quick start. Buying a franchise that is already up and running means that there is no delay, sp you can start doing business immediately. This can also translate to faster profitability.

When you buy a new franchise on the other hand, it can take up to a year before you are actually trading due to getting your location ready, although this is less of a problem for franchises under 10k, as many of them are home-based opportunities where premises are not needed.

Reduced risk and uncertainty. The fact that you are dealing with an existing franchise means that you can analyse actual historical data on sales and profitability in order to judge whether it is, in fact, a good business deal. You will be able to look at trends and see if the business is declining or in a strong position.

Bear in mind, though, that even if a business is in decline, you will need to delve deeper to find out why. It may be that the current franchisee lacks the skill or motivation to run the business to its full potential, and therefore possible that, under new ownership, the business may flourish.

Scope for negotiation. Whey you buy a new franchise, you have very little room for negotiation. Usually the price is fixed, and you will not be able to change the terms of the franchise agreement.

When you buy an existing franchise however, you may be able to negotiate on certain aspects of the deal, such as the purchase price and training you receive from the seller. You will still need to speak to the franchisor to establish the terms they are willing to offer you, but buying an existing business allows for more flexibility than starting a new franchise.

Disadvantages of existing cheap franchises for sale

Although buying an existing business comes with many advantages, it is important to be aware of any potential drawbacks:

Possible upgrade costs. When you are looking at existing cheap franchises for sale, it may be the case that the franchisor will require you to bring the location up to its current standards before you can begin trading. This may involve closing the location for a period of time to complete remodelling work.

You will also need to factor in the extra cost of any work that needs to be done and add this to your capital requirements. For this reason, it may be worth only considering home-based or online franchise opportunities when you are first starting out, to avoid any complications brought on by needing premises.  

Different terms. Just because you are buying an existing business does not mean that you will automatically get the same terms from the franchisor that the seller received. You may be required to sign an alternative agreement with different terms and new fees.

The franchisor may also require payment of a transfer fee or training costs, although you can negotiate with the seller on who should pay for these.

Why is the seller leaving the business? You will need to find out why the existing franchise is for sale. The reason could indicate a golden opportunity, such as the seller leaving due to retirement or ill health, or it could raise concerns.

It is possible that the seller is aware of reasons that the business is not going to be as profitable in the future, such as new competitors entering the market or a change in customer demographics in the neighbourhood. You will need to spend a considerable amount of time doing your research to ensure that the business you are buying is a good investment.

Possibly more expensive. Buying an established business means that you are inheriting cash flow from an existing customer base. This is likely to mean that the purchase price will be higher than buying a new franchise that has no reputation or customer following.

This should be relatively less of an issue if you are looking at cheaper franchises as opposed to franchises worth hundreds of thousands of dollars, due to the lower sums of money involved. 

Should you consider starting with an existing franchise for sale 

Whether you consider looking at an existing franchise for sale or buying new really depends on your priorities. If you want to start trading in the fastest possible time but are happy to pay a little more for your investment, then considering an existing franchise could be a good place to start.

On the other hand, if you have less money to invest but have more time to get the business up and running, you may be better off considering buying a new franchise. Either option is a good way of becoming a business owner without starting completely from scratch.

Take your first steps towards business ownership today. Browse our list of cheap existing franchises.