Buying a resale is the best way to reduce risk when investing in a franchise, says Derrick Simpson, managing director of Franchise Resales Limited
As a nation we are all becoming far more financially risk averse during these challenging economic times. Given the increasing numbers of people losing their jobs as businesses find trading conditions difficult, it is hardly surprising we are all looking after our pennies more than we have been used to.
I suppose it is this cautious approach to making any sort of financial commitment that has been behind the increase in interest in franchised business opportunities - it’s considered a safer way of going into business.
Favourable
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Most people who look at the UK franchise industry will have picked up the well publicised statistics about the success of franchised businesses versus standalone independent ones. It is for this reason the main banks involved in providing funds for franchisees offer more favourable terms to purchasers of franchised businesses than they would to independent start-ups.
Yes, despite all the press coverage about a funding shortage the franchise sector is still able to secure funds for purchasers with a strong business proposition. This is because of the ‘proven concept’ nature of franchising and the lower risk element for banks.
There is therefore a general reduction in risk by acquiring a franchised business. It is still up to you to assess whether the information and projections your prospective franchisor is providing are correct and achievable by you running this particular business. You need to be sure you can implement the marketing programme, deliver the sales and achieve the profits presented to you to make your business a success, mirroring that of other franchisees in the system.
How then can you trim the risk element even further? How can you be sure that a particular business will operate in line with the projections you have been given? How can you check the business will operate successfully within a particular marketplace or location?
The answer to all these questions is to purchase an existing business rather than starting with a new business from scratch - buy a resale.
With a resale business there is:
* A ready-made customer base.
* Cash flow from day one.
* A brand presence established in the local marketplace.
* An established supplier network in place.
* Trained staff already in place (if required).
* Evidence of what can and has been achieved.
All of this is already in place for you to take over and drive onwards. The franchisor is there to provide training and support, assist with your launch and provide hands-on advice, just as with a new franchise. With a resale, however, the business is also already there and waiting for you to inject your energy and drive to take it on and unleash its potential.
Publicise
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So how do you, as a potential purchaser, find out if resales are available in the area in which you live or to which you can travel easily? The simple answer is to speak to the franchisor of the particular brand and ask. Many franchisors do not openly publicise the resales that are available within their system, so unless you ask they may not tell you.
If, however, you are not fully committed to a particular brand or concept you could wind up trawling the various commercial sales websites looking for franchise opportunities and then searching to see which are resales of existing franchised businesses.
Most people who enter franchising are not often initially looking for a specific brand, but are actually seeking an opportunity that uses their skill set, which they will enjoy running and that will generate the income they desire or require. Very few are totally fixed on a specific brand or even sector, and in my experience the majority of prospective purchasers will move towards an opportunity that fits the majority of their requirements.
Where, therefore, do you go to obtain this broad independent view? Where do you look to find out what franchise resales opportunities are out there? The answer to these questions is also easy. On your search engine simply type in the words ‘franchise resales’ and you will be taken to the very site you need.
Franchise Resales is the only organisation in the UK that is dedicated to the sale of existing franchised businesses. Mostly these are franchisee resales, but we also deal with enquiries about entire franchisor network and master licence resales as well. We manage the entire process from end to end and work closely with seller and purchaser to ensure an equitable result and a hassle-free process.
Register your details on the site and let a Franchise Resales consultant discuss with you the opportunity that best fits your requirements. There will be the resale opportunity for you out there.
Funding
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But what about funding a purchase? How can you get loans to buy a business if banks are not lending? You may well think this, but the truth is that banks are lending. Funds are being provided by the main banks that support franchising - Lloyds TSB, RBS/ NatWest and HSBC all state clearly they are funding franchise purchases with sound business propositions.
Franchise resales have evidence of a trading past so propositions to secure funds can demonstrate the business will be able to repay monies borrowed - a logical requirement for a loan from a bank. How better to prove that your plan is achievable than to have the evidence of its past performance by acquiring a franchise resale opportunity?
Now, therefore, is a good time to ad. Take that step and take control of your financial future in the most secure way you can -a business format franchise resale.
