3 Main Options for Purchasing a Franchise
For entrepreneurs looking at purchasing a franchise business, there are many industries and sectors from which to choose. Practically any business can be franchised, and you will want to research each franchise opportunity carefully. Franchise Guardian advisors can help you throughout the process and provide any necessary assistance.
Out of all the different franchise opportunities, there are only three basic options for purchasing a franchise. We examine each one briefly below.
Purchase a New Franchise
For new entrepreneurs or experienced franchisors, this is the most popular franchise opportunity. The parent company seeks to expand into a new market or broaden their penetration of an existing market, and so a new franchise opportunity is available for investment. As with any new business, there are startup costs and other investments necessary.
Among your basic startup needs can be procuring financing, acquiring land, erecting a building, purchasing equipment, hiring and training staff, and crafting a marketing strategy. In most cases, the parent company provides assistance with most, if not all, of these needs. Especially since they have a vested interest in seeing your franchise succeed.
A second option for purchasing a franchise is to invest in one that already exists. These franchise opportunities occasionally arise when a franchise owner wishes to exit the system. That means you are essentially buying an existing, fully-operating business. There are several advantages to buying an existing, or “used” franchise.
- You are instantly in business, with an existing customer base and established cash flow.
- Bank financing may be easier to purchase an existing business.
- The franchisor or current owner may be willing to help you with financing.
- You can base your investment on hard operating facts, rather than projections.
- The location will likely already have trained staff and management.
When buying any existing franchise, be sure to perform due diligence and research the franchise opportunity thoroughly. If the location isn’t economically viable, or the franchise isn’t successful for some other reason, you need to know beforehand. Don’t assume that you can make a go of it if someone else could not.
Also, investigate the franchise system to which this location belongs. Ask how many owners have run the franchise you are seeking to purchase, and make certain the system does not have a high turnover rate. This could indicate a bad organization that you should avoid.
Invest in a Conversion Franchise
A conversion franchise opportunity is when an investor, typically an existing franchisor, establishes a relationship with an existing independent operator who in the same general business as the franchise parent company. For example, a franchisor with auto service locations enters an agreement for an independent auto service shop to join the franchise system. The independent shop owner agrees to sign a franchise agreement and convert their business into a franchise.
This franchise opportunity has a number of benefits, chiefly that, like an existing franchise location, the business is already operating with trained personnel, an established customer base, and a steady cash flow. With minor adjustments, the business now becomes a part of your franchising operation with little investment required past the initial franchising agreement.
Do You Need Help Purchasing a Franchise?
Whether you are looking for a new franchise opportunity, an existing franchise, or investing in an existing business, Franchise Guardian has an opportunity for everyone. Discover premium brands, become your own boss in a field you enjoy, and share in a proven business concept with like-minded entrepreneurs. We make it simple, let’s find you a best match!