Franchising Acquisition vs. Traditional ETA

July 23, 2022

by a searcher from Vanderbilt University in Tennessee, USA

Are there good resources that cover franchise acquisitions ?

I've noticed that many of the brokerages and broker aggregators (i.e. BizBuySell) seem to have a disproportionate number of franchise-related listings while most Searchfunder content focuses on traditional independent firms.

There's obviously a downside to not having total autonomy and splitting profits with the parent organization. However, it seems to carry lower risk with more support and (depending on the franchise) name-brand recognition.

On a related topic, is there a big secondary market for franchise territories? I am totally unfamiliar with how that works. Do the parent organizations typically take cuts of franchise sales as well?

Thanks!

Reply by a searcher
from University of Virginia in Red Bank, NJ, USA

Theres a pretty big franchise resale market. Slightly less transparent, but its out there. Also lots of stories of people that developed 1 unit, and then acquired their next 3-4. Franchise Empires podcase would be a good listen.

When I started my search I universally ignored all franchises as I didn't want to "split the profit". However now that I am 11 months in, I am actually looking at a few franchise resells. The key is buying into the right brand/industry. Happy to chat more about this is you want.

Reply by an investor
from University of Texas at Austin in Santa Cruz de la Sierra, Bolivia

Before deciding on a franchised business, I would make sure to understand the mother-brand's desires to grow in the area, its zone availability, etc. Having a franchise can be as thilling and fullfiling as any other business, but its upside as a sigle-unit endeavor would have a celing. In order to grow and have attractive exits in the future, one has to make sure that there is potential for a multy-unit organization.

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