Cayenne Consulting

Buying an Existing Franchise

The Good and Bad of Buying an Existing Franchise

Introduction

Many entrepreneurs don’t understand that business people who wish to purchase a franchise do not have to buy the franchise from the franchisor. There are thousands of people in the U.S. and around the world who have purchased and managed a franchise and, in many cases, multiple franchises, and now for one reason or another wish to exit the business. This often happens when a franchise owner (franchisee) has decided to retire or has decided to move to another city and will not be able to be a hands-on manager/owner any longer.

In the acquisition of any business there are always pluses and minuses and buying a franchise is no exception.

S.W.O.T.

In an effort to clearly communicate the pluses and minuses, we decided to prepare this article as if it were a SWOT analysis that a potential acquirer would prepare prior to buying an existing franchise. You might recall that a SWOT analysis describes the strengths, weaknesses, opportunities, and threats that exist in any business. SWOT analyses are often used in strategic planning but they will also serve our purpose here as we consider the pluses and minuses involved in buying an existing franchise.

Strengths

What are the strengths or advantages to buying an existing, operating franchise rather than buying a new franchise from the franchisor?

Weaknesses

What are the weaknesses or challenges that a buyer might confront when buying an existing franchise?

Opportunities

What are the opportunities that you might have in buying an existing franchise that you might not have in buying a new franchise?

Threats

What are the threats or dangers that might await a buyer of an existing franchise?

Summary

Buying an existing franchise is a great way to become a franchisee and business owner, and it has a host of significant benefits. However, just as with any investment, you need to do your homework, and you need to have qualified legal and business advisors working with you. Here are some tips:

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