Disadvantages to buying an existing franchise
You have to bear in mind that when you buy a franchise resale in Australia it can sometimes cost you more as you will be buying the goodwill of the business. You will still have to do your homework when purchasing a resale, even if it looks a sound profitable offering, you’ll need to dig from more information.
It is important to remember that when buying a franchise resale, you are not always going to be buying a successful business without problems. You must research this fully and your first question should be “Why is the franchisee leaving the business?”
Take into consideration also the fact that the existing franchisee may have old premises and equipment, which may have to be modernized and replaced.
Will the employees be staying? If you’re counting on having staff trained and ready you need to be sure they will stay.
Are the market trends or neighbourhood changing? Are competitors coming into the market that may affect the future performance of the business?
Make sure there are not going to be any new developments or road constructions that will have a negative impact to your business.
Check the location out as if you were starting afresh. If the franchise business has been on a decline there is no guarantee you’ll be able to turn it around. Just because you think you’ll work harder than the prior owner doesn’t mean you’ll perform better!
And sadly, some franchisees will have simply lost heart and allowed their business to deteriorate. Turning this around and winning back former customers can be very difficult.
Got a question to ask?
Steve Seddon - Westpac
Steve is a Senior Business Development Manager with Westpac. He specialises in the franchise sector and is on the FCA's Western Australian Committee.
Tim Kilham - Lanyon Partners
Tim is a director of Lanyon Partners Chartered Accountants and heads up the franchising area of that division.
Alan Branch - Optivance 360
Alan is an experienced consultant, commercial lawyer and franchise expert recognised for his skill in negotiating and completing business set up and expansion projects.
Vicki Prout - Sherpa Group
Vicki has been involved in the franchising sector as a Franchisor, Franchisee, and Consultant. She is currently an international consultant guiding businesses through their franchising journey.
Robert Toth - Wisewould Mahony
Robert has over 25 years of experience as a business lawyer and consultant. He writes regularly in franchise and industry journals and is a recognised leader in franchise law in Australia.