Franchise Resales Part II - Due Diligence Tips
Franchise Resales Part II - Due Diligence Tips
1. Be discreet. Most sellers will not broadcast that the business is for sale. This is beneficial for you, and for the seller. Selling a business requires time, and it is in everyone’s best interest that employees and customers don’t spend time worrying about “what ifs.”
2. Study the franchisor. Do this exactly as you would if you were interested in buying a new franchise. Do this first - before spending time investigating the existing franchise unit. Remember, you will be signing a multi-year agreement with the franchisor, not the seller. You need to like the business and believe that you and the franchisor will work well together. See chapters 10-12 of the franchise book The Educated Franchisee for specific steps to take in evaluating the franchise opportunity.
3. Meet the Owner. When you are satisfied that the franchise fits your skill set and can fill your financial and lifestyle needs, make an appointment with the owner of the franchise unit you are considering. You will need to gather a lot of franchise information, including why s/he wants to sell, and you’ll want to examine the history of the franchise’s financial performance. The seller should provide balance sheets, income statements, tax returns and other financial statements. Check them with the franchisor to see how they match up with other franchisees’ figures. Find an accountant experienced with this type of business who will look over the figures as well. This information will be critical to your decision and will obviously be a determining factor in arriving at the price you will offer.
4. Call Other Franchisees. It is unlikely the selling franchise owner will tell you the downsides of the business. You will have to do your due diligence to determine if there are internal or external problems that make the business unsuitable. Talk to other franchisees to get a feeling regarding their level of success and then apply what you have learned to the local franchise you are considering purchasing.
5. Explore External Changes. You might also need to pay a visit to Town Hall and ask if any large projects are slated for the area where the franchise is located. These types of projects can be positive or negative. You need to know what is happening in the area where the business will be and be comfortable that any changes that may happen.
6. Find out About the Employees. If you are pleased with the answers you get to the above queries, move on to questions about employees. What are their salaries? What hours do they work? Are they skilled? Are they likely to stay on? Are there any employment contracts or understandings, salary disputes, etc. outstanding?
7. Study the Physical Plant. If things are going well, inquire about location and equipment, which will further assist you put a value on the business. You want to know the status and terms of the lease, the temperament and availability of the landlord, and the value, age and condition of all equipment and vehicles.
To guarantee purchasing an existing franchise will be successful, you must do your research. Make sure you like the business model and the franchise management team. Be certain you’ll like what you’ll do each day. Understand the financials. Hire experts to help you in your evaluation. Dig deep for information within the company and within the community. And remember that buying a business is a negotiation. Make sure the price is fair and that you have the skills to make the business a great success.
Franchise Resales Part II Due Diligence Tips - To learn more about this author, visit Rick Bisio's Website.
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Purchasing an existing franchise will give you a concrete franchise education! Here is a primer on how to go about viewing an existing franchise:
1. Be discreet. Most sellers will not broadcast that the business is for sale. This is beneficial for you, and for the seller. Selling a business requires time, and it is in everyone’s best interest that employees and customers don’t spend time worrying about “what ifs.”
2. Study the franchisor. Do this exactly as you would if you were interested in buying a new franchise. Do this first - before spending time investigating the existing franchise unit. Remember, you will be signing a multi-year agreement with the franchisor, not the seller. You need to like the business and believe that you and the franchisor will work well together. See chapters 10-12 of the franchise book The Educated Franchisee for specific steps to take in evaluating the franchise opportunity.
3. Meet the Owner. When you are satisfied that the franchise fits your skill set and can fill your financial and lifestyle needs, make an appointment with the owner of the franchise unit you are considering. You will need to gather a lot of franchise information, including why s/he wants to sell, and you’ll want to examine the history of the franchise’s financial performance. The seller should provide balance sheets, income statements, tax returns and other financial statements. Check them with the franchisor to see how they match up with other franchisees’ figures. Find an accountant experienced with this type of business who will look over the figures as well. This information will be critical to your decision and will obviously be a determining factor in arriving at the price you will offer.
4. Call Other Franchisees. It is unlikely the selling franchise owner will tell you the downsides of the business. You will have to do your due diligence to determine if there are internal or external problems that make the business unsuitable. Talk to other franchisees to get a feeling regarding their level of success and then apply what you have learned to the local franchise you are considering purchasing.
5. Explore External Changes. You might also need to pay a visit to Town Hall and ask if any large projects are slated for the area where the franchise is located. These types of projects can be positive or negative. You need to know what is happening in the area where the business will be and be comfortable that any changes that may happen.
6. Find out About the Employees. If you are pleased with the answers you get to the above queries, move on to questions about employees. What are their salaries? What hours do they work? Are they skilled? Are they likely to stay on? Are there any employment contracts or understandings, salary disputes, etc. outstanding?
7. Study the Physical Plant. If things are going well, inquire about location and equipment, which will further assist you put a value on the business. You want to know the status and terms of the lease, the temperament and availability of the landlord, and the value, age and condition of all equipment and vehicles.
To guarantee purchasing an existing franchise will be successful, you must do your research. Make sure you like the business model and the franchise management team. Be certain you’ll like what you’ll do each day. Understand the financials. Hire experts to help you in your evaluation. Dig deep for information within the company and within the community. And remember that buying a business is a negotiation. Make sure the price is fair and that you have the skills to make the business a great success.
Franchise Resales Part II Due Diligence Tips - To learn more about this author, visit Rick Bisio's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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