Franchises: Building vs Buying ... Am I crazy?

by a searcher from Messiah College

3 weeks ago

I would like to hear from people who have BOTH bought and built franchises in new territories.

I've been a self-funded searcher for about 6 months. I haven't been interested in franchises until I recently found a home services brand that started in 2020, and seems to be rapidly expanding. Currently has 30 operating territories, with another 40 coming online in the next 6 months. 

MY QUESTION: is buying into new territories more work than its worth? My thought is to buy three territories and build over the next 5 years. Would love to hear from experienced people what their warnings and cautions are about this track. Per Jim Sharpe's blog this is an extreme minority of ETA folks that take this track, but want to learn from those that have done it! 

Thanks!

1 like
280 views
18 comments

searcher from University of Pennsylvania - The Wharton School

I'm in process of a supplemental education franchise rollup. I just closed my first acquisition and am planning to launch three de novo territories. There are pros and cons with each -- with acquisitions you get immediate revenue and profitability, but it also comes with legacy issues and you are likely paying for that revenue in debt. If you know what you're doing, there's an opportunity to take out smaller debt on a new build and grow it to the same revenues. So in ~1 year you could be at similar revenues but much smaller debt service. Interested in others' thoughts on this as well.

2 days ago | like reply | 0 likes

professional from University of Florida

Truly depends on the brand but buying an existing franchise often carries less risk. My often recommended strategy is to buy one existing and then either ETA in the brand or develop new in surrounding markets or both.

2 weeks ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Investor seeking Self-Funded Search Deals

Downsides of "buying a job" below 750k+ EBITDA?

Examples of self-funded searcher websites

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.