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Melbourne, Australia

Advantages to buying a franchise resale

Buying a franchise resale in Australia is becoming more and more popular as it is often seen as a safer option to starting your own business from scratch. There are many advantages such as:

  • It’s an existing business with and established customer base, and a local reputation
    • Starting from scratch means zero customer base, and a not yet recognized business
  • As an already established business it has a trading history showing potential income, and allowing profits to be generated at an early stage
    • As a new start business, there is no history or reputation in the community, and only a speculative guidance on earning potential, with only the possibility of reaching a profitable stage
  • An existing business gives you a guaranteed income from day one
    • A new business can take some time to get off the ground and may not make any money for quite a while
  • With a resale the business already exists
    • With a new franchise you will need to find a location, build out the site, purchase furniture, equipment & signage, find vendors and supply inventory, hire & train employees etc, etc, etc
  • There is easier access to finance with a resale franchise, as banks like the fact that they can base their lending decisions, not only on the franchise system and your suitability, but also on the trading history of the operating location, making it easier to make financial projections
    • A new franchise will be scrutinized more by the banks, as they will have to be convinced it’s the right location, with the right customer base, and sometimes they may not lend as much as they would do on an existing franchise as there is no trading history, which is a huge factor
  • With an existing franchise you will be starting with trained staff
    • With a new franchise it takes time to find & train the right people, costing more time and money
  • An existing business with have established suppliers
    • A new business will have to try out different suppliers before they find ones they are happy with
  • In a resale franchise you know the true cost as the business purchase is based on the asset base, its cash flow or some other agreed term or condition.
    • In a new franchise the franchisor will provide information in their Disclosure Document which at its best is only an estimate of costs to develop your new franchise business