Buying a Franchise Business

You need to do research and make the decision to buy based on facts, not on emotion or on the sales skills of the person trying to sell.

Franchises

There is no such thing as a sure thing. This is true even when dealing with franchises that have been wildly successful for others.

Even one of the most well-known franchises, McDonald’s, has restaurants that fail. Here are a few things to do and consider before buying a franchise business.

What is the Success Rate?

This seems like a good place to start. Of all of the franchises sold, how many of them are successful after one year?

How many are successful after five years?

Keep in mind that success and failure rates are not a guarantee of your success or failure, but it is a good starting point when deciding whether or not to buy a business.

How Many of the Franchises Will be Sold in Your Area?

Will there be a limited number of the franchises sold in your area, or will you become one of many over the next several years?

Sure, there may be a successful Burger King on every corner in a large city, but the same would not likely be true for a gym or a pet sitting service.

Cost to Purchase and Cost to Maintain

How much do you have to invest, and are you willing to lose it all?

Some franchises cannot be touched for less than a million dollars. That is going to exclude many people up front. Other can be purchased for a just a few thousand dollars.

You need to decide how much you are willing to lose. Obviously, you wouldn’t be investing in a business unless you thought there was a good chance you could make it work.

Still, you must remember that there is no sure thing when buying a business.

Also, many franchises must pay a monthly fee or purchase all ingredients or inventory from the parent company.

Keep all of these costs in mind when making the decision to buy a franchise business.

Do You Enjoy the Business?

If you hate the restaurant business then do not buy a restaurant. Seems like common sense, right?

But many people make the mistake of buying a business that they do not particularly enjoy working at or that they know nothing about.

One of the best things about owning your own business is that you can decide what type of work you will be doing.

Buying a Business

There are also some questions you should ask when buying a business. Here are a few of them.

Why is the Seller Selling?

This is, obviously, one of the most important questions.

There are many reasons that a person would sell a successful business, but selling is also the way that some try to get out from under a business that is not thriving.

Find out why they are selling and be sure to study the books and tax returns to be sure that the reason given matches what you find in the books.

Will the Seller Help with the Transition?

Find out if the seller is willing to help you take over the business or if he plans to be gone the day you hand over the check.

There are going to be questions that arise in the first month after you take over. It is a plus if he is willing to help you get through your first few weeks.

Does the Seller Pay Vendors on Time?

Does he pay his bill on time? If not, it could be a sign of trouble even if the books look fine.

Of course, he may just have been lax about paying even though the business was thriving. If he wasn’t timely with payments, you need to know why. Buying a franchise business is a huge decision. Don’t take it lightly. Do your research and ask the necessary questions.

Doing so will help put you on the path to success.