Buying a Franchise
Considering buying a franchise? Let us help you evaluate new and existing franchise opportunities to find the right fit for you!
Minimize Risks – Maximize Return
Isn’t this what everyone wants to do when making an investment or owning a business?
Finding the right fit is key to achieving this goal because if it’s the right fit, you’re happy and excited about your business venture and the likelihood of you being successful is dramatically increased.
You need a professional matchmaker, coach, and business advisor to minimize your risk and maximize your return. We are ready to assist you in finding the right franchise or existing business opportunity.
Call us today at (972) 786-0017 for a free consultation.
Learn more about buying a….
BUYING A NEW FRANCHISE
Many people who haven’t owned a business before gravitate to a franchise because of the training, the marketing assistance, the assistance of the franchisor and other franchisees and the BRAND. The concept is typically proven because “X number” of franchisees are using the model everyday. It is less risky than starting your own business or buying an existing business. Who will you call if something goes wrong in a start-up or an existing business after the transition period when the seller has moved on to something else?
Let’s face it……you will make mistakes. A franchise will possibly lessen the number of mistakes because the learning curve has been diminished. As the franchisor works to expand their brand, they strive for the right fit in franchisees so that the franchisees validate well when contacted by “prospective franchisees”. Therefore, the franchisor has difficulty selling franchises without “happy” franchisees. Will 100% of the franchisees be happy? Of course not, because some will not be following the system and perhaps have found out they are not a good fit for this particular franchise concept. The other common reason for unhappy franchisees is the franchisee going into the business undercapitalized. Franchisors will tell you to plan for 6-12 months of working capital. Invariably, some people will think they can make it work in 3-6 months. Tough to do.
BUYING AN EXISTING FRANCHISED BUSINESS
Often Franchisees will decide to sell their business before the end of the term of the franchise agreement. This could be due to a number of reasons: health, personal circumstances, undercapitalization, and/or inability to follow the system. The price you pay is similar to the Existing Independently Owned Business above, however, there’s also an “intangible” factor. The fact that the business is a franchise brings certain “intangible” value because it’s a system of doing business and it’s proven because of the brand and number of units. It can also bring a higher multiple of cash flow in pricing the business.
Sometimes the franchisee wishes to sell at a point when the business is at “break even” or slightly negative in the cash flow. The business is past the “ramp-up” stage and is on the way to cash flow positive position; however, the buyer candidate will need to be someone interested in franchised concepts and someone who sees the value of the partially ramped up business. Because of this factor, the buyer base is limited. In addition, the franchisee will often want to recapture his total investment. This is typically not possible at that juncture. Existing business buyers are seeking a “stream of income”. Since the business is not making money at that point, the buyer will not be willing to pay enough for the business for the franchisee to recoup his entire investment.
An experienced business broker or franchise specialist can help you though the red tape and difficulties in finding the “right” buyer candidate for your particular business. A franchise specialist can also assist a prospective franchisee in narrowing the field to find the “one” best suited to them.
BUYING AN EXISTING INDEPENDENTLY OWNED BUSINESS
Some buyer candidates wish to avoid the “ramp-up” stage and seek a business that has already ramped up and is currently profitable. The price you have to pay is directly proportional to the earnings of the business. Existing businesses are typically priced as a multiple of cash flow. The cash flow is defined as what’s left after “necessary” business expenses have been deducted.
Some of the pitfalls you could encounter: make sure there’s documentation to support all financial information including tax returns, sales tax returns, etc. Make sure the greatest part of the revenue is not derived from only 1-2 customers. If so, how will you make sure to keep those accounts? Research the industry and competition. Check for market trends and the possibility for expansion. Make sure the seller has adequate equipment and it’s all in working order.
At Franchise Opportunity Specialist, we can help you find the right franchise or existing business opportunity. We’ll assist you in mapping out your business model, focus in on the right opportunity, prevent mistakes, and navigate the process.
Give us a call at (972) 786-0017 for a free consultation or complete the following form and we’ll contact you.
Franchise Opportunity Specialist
13140 Coit Rd., Ste. 211
Dallas, TX 75240