HOW TO FRANCHISE?

In some situations, once you focus on a specific franchisor you’d like to work with, you’ll have the option of taking over an existing franchise (as opposed to opening a new location from scratch). Taking over an existing business has many benefits, including the following.
■ The location has already been selected, and the business is fully built and operational.
■ There’s already a staff in place, so you won’t immediately have to hire and train a new team of employees.
■ The businesses’ customer-base is established. The business has a local following and reputation within the community.
■ You can evaluate the past financial records of the existing business and more accurately calculate profit projections for the future.
■ You can potentially save a fortune in startup costs.

Of course, if the opportunity to take over an existing franchise location exists, there must be a reason for it. It’s important that you determine this reason and make sure you’re not buying into what was a huge problem or burden for someone else.
If an existing franchisee is simply retiring, that’s one thing. If, however, he or she is disgruntled or is on the verge of bankruptcy, those are other situations altogether.

If you decide to take over an existing franchise location, you’ll need to negotiate with the existing franchisee as well as the franchisor. The process is somewhat different than starting a new franchise location from scratch; however, for the right person and when the right situation exists, this can be an extremely viable option.
Along with negotiating purchase terms of the existing franchisee, you’ll need to work with the franchisor to make sure you can easily take over the existing franchise term (from the previous franchisee), plus have renewals available to you. Make sure you understand exactly what’s being offered by the franchisor and that your interests will be protected over the long-term.

Some attorneys that specialize in franchising also offer legal services for potential franchisees looking to take over existing franchises. It’s important that you hire an attorney with this type of experience. In addition to relying on specific franchisors to tell you about existing franchise locations that are available to be taken over, there are companies and resources that specialize in promoting the sale of existing franchises. Some of these companies and resources include the following.
■ Entrepreneur: A monthly business-oriented magazine that has a classified advertising section that lists existing franchise-based businesses for sale (www.entrepreneur.com)
■ Franchise Update: A quarterly print magazine (www.franchise-update.com)
■ Franchise.com: An online service with the goal of expediting the franchise buying and sales processes for franchise buyers and sellers (www.franchise.com)
■ National Business Exchange: A quarterly print publication and online database that lists existing franchises for sale by their current owners or franchisors (www.businessexchange.com)
■ The Business Resale Network: One example of a company that brokers existing franchises (www.br-network.com)
■ USA Today: A national daily newspaper that often runs classified ads for existing franchise-based businesses for sale
(www.usatoday.com)