How to buy a franchise
In this article we’ll cover a couple of basics on how to buy a franchise. For example, a South Sacramento retail center at Florin Road and Franklin Boulevard recently sold to a LA-based retail and management firm. Tenants at the center include Walmart Neighborhood Market, 99 Ranch Market, 99 Cents Only, Ross Dress for Less, Baskin-Robbins, Sally Beauty, and Payless Shoe Source. Some of these are franchises, and frequently entrepreneurs will see a new or renovated retail space as a great business opportunity for a possible franchise.
In some instances, these people are unprepared to be franchisors. The same can be said for those seeking knowledge on how to buy a franchise. Becoming a successful franchisor requires capital, strategic planning, a strong management team, and a consistently successful business model that can be replicated. And if you are buying a franchise, you’ll want to be certain that you see these attributes in a franchisor.
A Profitable Business Model. There are lots of small businesses have the image of being financially profitable, but don’t consistently (or ever) turn a profit. A franchise needs to have a business that will consistently give franchisees a lucrative opportunity after they pay the franchisor the franchise fees.
A Reproducible Business Model. Franchisors need to have the requisite systems in place that can be easily replicated and implemented by franchisees who are coming into the business arrangement with varied backgrounds and skill sets that are different than those of the original business founder. So both potential franchisors and franchisees need to see that the unique qualities of the founder—his or her expertise, charisma, personality, or sales skills, along with the location of the original business, or the business’s long-standing clientele can be consistently and repeatedly duplicated.
The Franchise Network. Find out if the business will benefit from the economies of scale or the collective purchasing power of a large number of franchisees. There are some businesses that are better prospects for franchising due to the fact that they get a big boost from the power of regional and national advertising or the ability to work with Fortune 500 companies through the scale that comes with a vast franchise system. Is there or is it feasible to have such a network in place?
The Market of Potential Franchisees. A franchisor is looking to sell franchises, so there must be a target market. You should have a list of those who would make for strong initial franchise owners. As a potential franchisee, you’ll want to judge how existing franchise are faring. Ask those initial franchisees about the process and if their businesses are thriving.
Management. It is important for both franchisors and potential franchisees that the management team has the ability and resources to provide the necessary training, marketing, and support services to franchisees. That’s part of what’s baked into the deal, and a large component of the attractiveness of the franchise.
Capital. To set up and run a successful franchise, the company need the capital to fund the cost of a becoming a franchisor and supporting the system. Launching and operating a franchising program is expensive, and the initial franchise fees may not be enough to pay for the expenses incurred as a franchisor. Franchisors usually lose money until their franchise system has operating franchises. Franchisees should look into the capital investment of the franchisor.
If you are looking to purchase a franchise, analyze these items to make sure that your prospective franchisor has the capital, planning, management team and support, along with a consistently financial successful business, before you take any further action. Work with an experienced business broker who can help you with all of these concerns. Andrew Rogerson is a business expert and has negotiated hundreds of franchise transactions in cities throughout the Sacramento Region. He’s shared his know-how on how to buy a franchise in Citrus Heights, Rancho Cordova, Folsom, Elk Grove, Roseville, Rocklin, Davis, El Dorado Hills, and Cameron Park. Andrew can help you with deciding on an appropriate franchise and location in the area.
Spend some time talking with professional business broker Andrew Rogerson. He knows about how to buy a franchise and businesses in the Sacramento area. Please visit our website Services. You can also get in contact with Andrew via email or call him at (916) 570-2674.