Advisory Jul, 25 2011

Watchfully invest for smooth ride ahead

Taking up an existing franchise is emerging as a lucrative opportunity. It involves investing in an already established and operational franchise without any fear of initial franchise setting challenges. Read on...

By Abha Garyali
Sub Editor
Watchfully invest for smooth ride ahead

Franchise industry is progressing due to the ever-increasing range of opportunities it is offering. Along with it the traditional way of buying a franchise from the franchisor and selecting a new location is also changing. The concept of buying an existing franchise is coming up in full swing. The term ‘existing franchise’ stands for a franchise unit that is already working and is well-known to consumers as well as customers. This concept is unique and has been popular from day one because it offers a lot of leverages to a new entrepreneur. The business is already up and running; therefore one can start generating profits immediately. The outlet already has a trust built in among customers, employees and cash flow starts from day one. Yet another benefit is that the new franchisee will not have to choose a location, spend money for infrastructure and construction while taking an existing franchise.

Reasons for re-selling

No doubt buying an existing franchise is an emerging opportunity today but the question that would always trouble an aspiring entrepreneur is if the franchise is already running successfully then why anyone is willing to sell it off. Let us find out:

Immigration to a new city or country: It is quite often that people shift their city or country. For instance a well to do franchisee may have to go and settle down with his son in America. For him a better option is reselling his outlet than to shut down his business.

Old age: In few cases a franchisee can think of reselling his outlet when he feels he cannot manage his business due to old age. With children moving out and no one to share the burden, re-selling offers an extra income to the franchisee.

Leaving entrepreneurship: Few franchisees may want to take up a job and make a move from entrepreneurship to employment after testing their business acumen and skills.

Lack of capability: It is often seen that youngsters jump into entrepreneurship without proper knowledge and capability for it. Such franchisees can also opt for re-selling.

Experience failure: A common reason for selling is failure. Existing franchisees may have failed in their attempt at entrepreneurship. The best course for them is to re-sell.

Capital needed: An established franchisee may consider re-selling when he needs money for personal reasons.

Before investing in an existing franchise

An entrepreneur aspiring to take up an existing franchise business needs to keep certain things in mind before investing. Here we discuss these issues:

Personal interest: Business is passion. If an individual enjoys his business the results are more productive. An aspirant often opts for buying existing franchise as it is easy to run is the first step towards failure. Rather one should look for his interest in the business.

Limited financial knowledge: As a potential franchisee of an existing unit, you have an access to basic information regarding it. Nevertheless do not expect too much financial information from present owner. He will not share the true picture of financial gains or failures with you.

Buy franchise on loan: It is always advisable to take loan for investing in business. You may have cash available but avoid investing all your money on business. You should keep a stash on hand for emergencies and business improvement for later stages.

Analyse the present owner: It is always recommended to do any business deal with people you like and get positive vibes from. Buying a franchise from an owner who makes you uncomfortable may hassle the whole buying process, which itself is quite a long and complicated process.

Franchisor, the real owner: Buying an existing franchise means dealing with the present franchisee of that outlet. However it should be in the mind of the prospective franchisee that the real owner is the franchisor, not the franchisees. Therefore it is of utmost significance to meet and discuss business with franchisor. You should judge the keenness of the franchisor for reselling the outlet before making the final decision.

Take your time to decide: Making an offer after researching about the unit does not mean that you have committed to buy it. Take your time for negotiations and coming to know more about the unit as well as the brand. As a prospective franchisee, you can always cancel the deal if it is not according to your expectations.

Be positive after closing the deal: Be positive in your approach once you have taken the final decision of buying a particular outlet. Do not keep delaying the final process of payment due to your unsure nature. You cannot afford the owner to have second thoughts or selling it to some other aspirant, or news of the sale to leak out to employees, suppliers and clients.

Taking an existing franchise may have numerous benefits but it can only be beneficial for the aspirant if the decision is made after proper research, about the franchise and the brand. Investing in it only because there is less of hard work involved may not be the best of reasons for buying.

Related: Spreading wings overseas

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