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So you’ve done your research and decided that a franchise business with all the support that comes with it, is the best option for you. But have you considered franchise re-sales in your plans?
Denise Hutton-Gosney, MD and Founder of franchise business Razzamataz Theatre Schools explains why buying an existing franchise can offer you some wonderful advantages.
When discussing franchises, a re-sale refers to the purchase of an existing unit. There tends to be two types of re-sales available; those that are successful and profitable and therefore will command a higher sale price, and those that have not reached full potential, which could, in the right hands, turn out to be a fantastic investment.
We have had re-sales gone through and in just a short while, the new owner has completely transformed the school. Sometimes people take on a business without giving enough thought to it and that is why the franchise does not do as well as it could. With a change of owner who is committed and prepared to put in the hard work and follow the franchisor’s advice, the same business that was making just a small profit will quickly flourish.”
When researching re-sale franchises, the first thing to discover is why the franchise is up for sale. In many cases, it is simply due to a change in circumstance of the franchisee. Many of our re-sales have stemmed from the owners need to relocate and unfortunately a few have been due to ill health. We have such a wide range of franchisees from different backgrounds that it would be impossible to pinpoint any trends so the best advice is to find out from the individual.
As well as talking to the seller, you need to talk and research the franchisor as well as competing businesses within the same industry.
From the seller you need to understand the financial performance of the franchise over the last year or two. Don’t just focus on where the franchise is at this moment, are there any financial trends that you can pinpoint?
Many franchises will have employees so as a potential new owner, you will need to find out if you can retain these employees and assess their value to the business.
The venue of the business should be discussed so you understand the status of the premises. You don’t want to find that after taking over, the lease has expired and you need to find new premises without any warning.
For your own protection, ask if the current owner knows of anything that has not been disclosed to you that might hinder the business in the future. Your legal representative can then include their answer in the purchase contract.
Speak to the franchisor to confirm any questions you had with the seller. We invite all people who are considering re-sales to come to Discovery Dens.
We are rigorous in this process because we only want the right people to be in our network. We won’t allow the existing franchisee to sell to anyone until we’ve had the chance to meet them and assess their suitability.
It’s not always easy to evaluate the price of a business. To judge if the re-sale franchise price is fair, start by understanding what the cost of a new unit in the network costs including all the marketing costs associated with its opening. Some re-sale franchise businesses can be much higher than the price of a new franchise but if there is a good track record with an existing customer base, this may make future trading easier to predict giving you more peace of mind.
People can be resistant to change so if the business has employees you may have to overcome some concerns with them. You may also have a different way of working than the previous owner so you will need staff that are adaptable.
If you are buying a re-sale, it’s really important to put your own stamp on it from day one. Customer care is always key and the first thing a new franchisee should do is make sure their customers have the best experience possible.
If the re-sale is established, you will avoid much of the difficulty associated with starting a new business so you can hit the ground running.
With an existing customer base, you can focus on growing the business and taking it to the next level. With staff already in place and a strong sense of recognition in the local area, you will be in a better position to project revenue as long as you stick to the franchisor’s proven marketing systems.
Starting any business, including a franchise, will take a while to generate income. With a successful re-sale, this process is usually shorter.
Right across the franchise sector there are bargains to be had in the re-sale market. Some franchisees need a quick sale due to a dramatic change of circumstance. Even if a particular franchise is not doing well, take a look at others in the network and consider if it is down to poor management rather than the business model. If you do your research, then taking over a franchise that is not performing well can prove to be profitable for the right person.
Razzamataz are a forward thinking, innovative theatre school business that offers students the opportunity to learn a range of styles and disciplines.
Razzamataz has an association with their partner Duncan Bannatyne and working in partnership with TUI in 17 resorts overseas. Your business will be promoted to thousands of potential Razzamataz customers all summer worldwide!
Children take part in lessons all summer and parents receive promotional materials for their return to the UK! There's never been a better time to join!
Why note take a look at the current Razzamataz Re-Sales!
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