Have you always wanted to own a franchise but are intimidated of the legal work that is entailed to start up a location from scratch? If this is the case you can buy a franchise that is already existent. There are some negatives and positives to buying an existing franchise location.

The major benefit of taking over an existing franchise is that it is already in operation. This means you do not have to go out and look for real estate, most employees stay so you don’t have to go through the hiring process. Another plus that it is already in operation is that vendors will already have their delivery schedules worked out and you will have well established customer base.

Another benefit in taking over an existing franchise is that you have a realistic shot of the profitability of the franchise. If you think that buying an existing franchise will be good because it will be booming immediately, you’re wrong. A lot of franchisees have to sell their franchise because they did not make as much profit as they were intending. You will have access to all their monetary records and earnings history to see if it is wise to enter that franchise. If the numbers look solid, than go for it; however, if the numbers don’t seem too good, walk away now.

Another benefit is that you won’t have to pay certain fees. To make sure of this, you’ll have to closely inspect the franchise agreement you are entering into. In most cases, you will enter the existing franchise agreement. Make sure that you don’t mistake the franchise agreement that new franchisees would enter into. The benefit in keeping the old agreement is that the fees may be lower than what they are in the new franchise agreement. However, you will probably have to pay a transfer fee instead of the new franchise fee.

Before entering an existing franchise, here are some things to think about or investigate.

Find out why the franchisee is leaving. They may be leaving because of a poor relationship with the franchisor. You wouldn’t want to enter into that same kind of relationship.

Investigate the demographics of the city that the franchise in. Are there major changes happening in the community that may affect the well being of your franchise? Look up the market trends and predictions.

Another thing to take into consideration is that the current franchisee will probably be determining the purchase price or the two of you may determine it together. Remember though that there is a time bracket where the franchisor has the right to buy it back before it is up for public sale. So find out how long that time bracket stays open.

This entry was posted on Thursday, January 10th, 2008 at 4:01 pm and is filed under Franchise Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.