Locating franchises for sale

Franchises are just a business under another name and a buyer can locate them the same way he would any other business. The sources for finding franchises that are up for sale are found on the Internet, in newspapers, through local business brokers, commercial brokers and major franchise offices. A potential buyer should try all of these available sources to get an idea of what is currently on the market. If a buyer has a specific franchise in mind, it would not hurt to ask similar franchises in the area if they know of any for sale.

You could also contact the franchise directly and ask them if they know of any owners looking to sell. They may not introduce you, but they always have franchises up for sale. They may have exactly what you are looking for, or they may just keep you on file for a certain area of their region.

The price range and the type of franchise

Most buyers have a very good idea of the type of business they are interested in owning. The type of franchise will determine a price range that the buyer can consider in relation to what they can afford. The other factor is if you can find a franchise that is for sale in the area that you want to have a business. If not, is there a potential location that would be promising to start up a new franchise? If the buyer has no interest in starting a new franchise, then they will have to wait for one to come up for sale, change the area that they are interested in to one where there is a business for sale, or see if there is a similar franchise for sale.

In some cases, the idea of owning a franchise and finding a deal just do not mesh at the time. If this is the case, the buyer should spend some time in the area that they are interested in and get to know the franchise owners in the area.

Let it be known that you are in the market and maybe one of them will decide to sell.

Coming up with a fair asking price

The best part of buying an existing business is there are real records of income and expenses that can be investigated and used to develop a realistic price or worth of the franchise. If the business has been growing at a steady pace over time, the price can include some growth element but, depending on the franchise, there is a limit to what one franchise can do in total business.

It is wise for any potential buyer to get expert help in looking into the finances of a business they are considering buying Expert evaluators can be hired or the buyer can use a CPA. The reason for doing this is these numbers could be used to gain financing or a business loan. The fact that the price was the result of the work of a disinterested creditable third party will help a lending institution decide whether the loan is reasonable in relation to the business’s value.

Remember that most owners when selling will set the price higher so they have some room to negotiate. They will also have two real prices in mind. One will be a price for full cash out price and the other price would be if the old owner has to help with the financing and not get completely paid off when the business changes hands.

If employees are involved

If the business utilizes many employees, like a fast food franchise, the new owner should make sure that the key people are going to stay after the sale. The changeover period is critical and employee turnover at that time could have negative consequences. Having people who know the business inside out on the staff can help the new owner get started with their feet on the ground.

If the old owner has a successful system in place to hire and fire employees, the new owner should at least look at it to see if there are parts of it that they can keep in place.

The basic rule here is to not come in and make wholesale changes immediately. Let some time pass if the business is doing okay as it is currently being run. If there are problem areas, discuss them with the assistant managers or even the old owner if he is available for discussion. Keep the staff informed as to where you want to go and how you plan to get there. If they have suggestions, it is smart to listen closely as maybe their ideas are better suited to solving the problem you are trying to correct. Treat the old employees with respect and try to get them on your side as quickly as possible. Respect, trust, and fairness go a long way in keeping employee relations on a solid footing.

Suppliers

Franchises often have rules that restrict who an owner can buy supplies from. Many franchise owners has been frustrated by this part of the franchise contract. Since this is the case, the new owner should be very clear on what can be done and which purchases are controlled by the franchise contract.

In any case, the old owner can supply the new owner with a list of suppliers that the business has a relationship with. This is important, as efficient supply programs are set up to order from established suppliers who deliver as promised and are less likely to cause problems for the business.

Suppliers that can be counted on are critical to running a business that depends on timely deliveries with few mistakes. Failure here can become a nightmare very quickly for the franchise owner. Mistakes in supplies can hurt the company’s ability to deliver what they promise to their customers. This can have long-term consequences for the business. Visit the franchiselogix franchise supplier division to learn more about franchise suppliers and their services.

Conclusions

Finding a business to buy is the first serious decision the buyer must make when buying franchise. A dedicated buyer will use all sources to find a deal they can live with and the time used is worth the investment. Once a franchise is located, the buyer should make sure all of the questions that need answers are both asked and answered. Facts and not assumptions are the grease that makes these deals come together.

It never hurts to bring in expert advisers when looking for a business to buy. They may be able both to help in digging out a good prospective business and then to come up with a professional assessment of what it is worth using the numbers supplied by the current owner’s verified financials.

As part of the deal, the buyer should become very aware of all aspects of the franchise contract and any restrictive rules that it may contain. Any supply restraints and advertising payments must be understood and figured into the business plan after the sale. Due diligence is the operative plan as the sale is hammered out and details are agreed to between the buyer and the seller.

All of these steps are important elements of locating a franchise to purchase.