You’re considering going into business for yourself. Perhaps you’re looking into a franchise, but you’re not sure you’re ready to start a brand new franchise outlet. Even with all the support and systems in place to aid new franchisees, the thought of tackling a brand new franchise outlet can be intimidating to some. An attractive option for those individuals may be a resale franchise opportunity.
Franchises all over the country will routinely be resold by the previous franchisee for a variety of reasons. These outlets may be a little more “ready-made” for an immediate business opportunity, yet all businesses aren’t created equal. Also, you may not know which franchises are for sale. Many times, the franchisee must work back through their franchisor in a resale opportunity. You need to find the right guidance and investigate, there’s no substitute for performing your proper due diligence throughout the business investigation process.
Consider the following:
Look into the historical track record for the finances of the business. Ask to see balance sheets, tax returns and profit-and-loss statements. Understand from the franchisor how these numbers stack up against their other franchisees’ numbers in similar markets. Also, make sure you’re able to properly value the company based on that historical data. You may enlist the help of a knowledgeable CPA who can help determine the value of the business. (more…)