New Business Opportunities from Touchstone Business Advisors

Have you considered buying a new franchise business? There can be several advantages to buying an existing franchise location, instead of building out a new outlet. And, it can be difficult to find a prime territory for a highly rated franchise concept.

If the territory is so great, why is the franchise being sold? Statistics show that on average, franchise businesses change hands within five years. This should not to be interpreted negatively, as there are many legitimate and common reasons that can lead a franchisee to sell his or her location, such as family (birth of a child), retirement, relocation (of spouses job), and health reasons. Others find they did not anticipate the lifestyle change the new business requires.

Here are some reasons to consider the purchase of a franchise resale rather than a new franchise location:

More predictable baseline for forecasting performance
New franchisees rely on the company's UFOC and, hopefully, discussions with other franchisees, to forecast the performance of their prospective location. With a resale location, you have concrete, historical sales, expense and profit and loss data at your disposal. You also have direct experience with various response rates from the previous owners marketing efforts. All of this data provide you with a more accurate baseline to forecast future performance of the franchise and your potential return on investment.

Pre-existing customer base and running start on revenues
When you open a new franchise location, you start with a grand opening and customer number 1. Time becomes your enemy, as you fund negative cash flow until your customer base is built to a level of positive cash flow. With a resale location, you inherit a pre-existing loyal customer base on day one.

Built-out, fully equipped and ready to go
With a franchise resale, you can literally close on the sale of the business today and unlock the doors to let customers in tomorrow morning. Building out a newly leased space, fitting it with required equipment, stocking initial inventory levels, establishing operating procedures, identifying suppliers and hiring employees (if necessary) again takes upfront time and resources for a new franchise location that are mitigated when you purchase a resale location. Saving both time and cash flow are critcal to success in a business ownership transition. The running start of buying a resale location allows you to concentrate your time and resources on marketing and advertising, which are more critical to building the success of your franchise location.

Attractive pricing and seller financing
New franchises are offered at a pre-established, set price with little or no room for negotiation, particularly when a Master Franchisor holds the rights to territories in a given state or area. A resale location may be on the market for personal or financial reasons, which leads the existing franchisee to offer the business at below-market value. Moreover, the existing franchise might be willing to finance a portion or all of the purchase, depending on their urgency, making the purchase of a resale location easier to consummate and a more attractive investment than a start-up franchise location.

Touchstone works with business seekers looking for independent businesses, as well as franchise resales. An established franchise resale may be a great option to consider, depending on your background, skill set, lifestyle, and financial goals. For more information, please visit www.touchstonebiz.com or contact Touchstone at (303) 278-7501.