A franchise resale can be a smart financial move, but only if you invest a little time and effort into the pre-sale. There are several things you need to know before moving forward.
- Start by analyzing the methods used by the franchise. You will need to adhere to these methods, especially when it comes to franchise marketing, so you want to be familiar with what is expected and make sure you are willing and able to accomplish these things. Just as the initial owner did (or should have done), you will need to conduct your own investigation into information beforehand.
- Next, find out why the existing owner has decided to sell. If there are serious problems or the franchise is in the process of failing, you will want to move onto another opportunity. There are plenty of reasons a franchise resale might occur, none of which are a negative indication of a failing business or a problem. Sometimes owners just want to get out of their situation because of retirement or another reason – you need to know what this reason is before moving forward.
- Finally, you will want to review the financial statements before completing the resale. Usually, three years is enough to give you an idea of how much profit the business is earning. It is also a good idea to review this information with your CPA. This way he or she can explain in plain and simple terms what you are dealing with and whether or not you are looking at a good opportunity. Even if you are comfortable with financial statements, it is still a good idea to have another set of eyes go over the information.
One more thing: make sure you read the franchise agreement or disclosure document. You need to know what your rights, duties, and obligations are regarding franchise marketing and other issues before making a long-term commitment.
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