Does anyone have experience purchasing an existing franchise?

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18

Reply by an intermediary
from University of Memphis in 5000 Linbar Dr, Nashville, TN 37211, USA

We have purchased franchises personally and for numerous buyside clients. Pitfalls are not significantly different than with buying any existing business. The Franchisor agreement will always heavily favor the Franchisor; allowing them significant authority to modify terms, compete against you, etc. but rarely will a Franchisor actually implement changes that will risk them losing franchisees. For newer or smaller Franchisors, the primary concern is will they be able to provide the support they promise, can they provide solid lead generation through their marketing fund and will they build and protect the Brand. In our buyside searches for clients we see that the more successful franchisees do much more than just follow the basic plan that the Franchisor provides. The basic plan is good for a new franchisee starting-up but is insufficient for an established business or once you are approaching the mid-range of the average revenue for a franchisee. You need to market locally, provide excellent service, treat your employees & customers very well. One great thing about the better franchises is the ability to network with other owners across the country on a regular basis. You get great ideas, recommendations and build friendships and in most cases, you are not directly competing.

Reply by a searcher
from University of North Texas in San Antonio, TX, USA

I agree with ^redacted‌ assessment. It's crucial to conduct thorough due diligence and have legal counsel review the Franchise Disclosure Document (FDD) carefully. Understanding the details is essential to making an informed decision and not losing money.

When considering a franchise purchase, dig deeply into why the business is being sold. There's a significant difference between franchisees that fail due to poor management and those selling because of external challenges. Examining financial records, customer demographics, and local market conditions will give you a clearer picture of the situation.

Personally, I must admit I lost a significant amount of money with a deal and while not opposed to franchises, it's essential to investigate thoroughly before you invest.

As Dave Ramsey would say, "I’ve paid the “stupid tax” (mistakes with dollar signs on the end) so you don't have to."

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