A lot of people like buying used . . . but buying a used franchise? Don't look surprised. Experts estimate that about 10 to 15 percent of new franchise sales may actually be buyouts of existing locations, although those calculations could vary widely based on the size and age of the system.
Charles Bockwith is one franchisee who chose the existing-franchise route. After being laid off from his sales job two years ago, Bockwith and his wife, Claire, both 44, took note of a friend's success in employee leasing and began looking at franchises in the staffing industry. This January, they became owners of an existing Express Personnel Serviceslocation in Pensacola, Florida.
Franchise Zone talked to Bockwith about what it was like taking on an up-and-running franchise.
Franchise Zone: How did you find out this Express location was available?
Charles Bockwith: By just snooping around, really. I was actually looking at one of Express' competitors, and I was talking to a franchisee who was somewhat dissatisfied and suggested I call the competition, which I did. That's when Express corporate told me this [existing] office was available.
When you were looking at franchises, did you ever think about starting from scratch?
I was considering a start-up initially. It went down to the wire. I had both franchise agreements on my desk at the same time for my signature.
Why did you decide to go with this one?
It just seemed to me that by buying an existing business, I'd be able to get to profitability quicker. And you just don't have all the pains you would have in a start-up-everything from trying to find your location to your interior remodeling to developing a client base from zero.
Did you research differently on this one than you did with the start-up?
Yeah, I had to get into some valuation calculations, and I looked at historical performance, which gave me more of a true picture of what I was getting into. I wouldn't have had that with a complete start-up. But I did have to figure out a value and what would be fair as best as I could, and I had to come up with dollars to do that from scratch. In a start-up, those dollars would be spent over a longer period of time.
Did you observe the store in operation?
I did. I observed this one as well as some other offices from the same franchise. I had some concerns-it's a really scary thing to go into a business you don't have a lot of experience in. Also, at the time I was buying, it wasn't very clear as to what was going on in the economy. [The economic downturn] also weighed a bit on my decision to steer toward an existing [franchise] vs. a start-up-working with an existing client base just looked like the better route.
What about the current employees?
That was part of the negotiation. This office was actually owned by an absentee owner, so he had employees in place here, and that was part of the price of the deal. We took an amount of money off the original purchase price, in kind of a bonus structure, to ensure that the existing people would want to stay for a period of three months. We wanted to make sure the torch was passed in as smooth a way as possible. Actually, I only have one of those three employees at this time.
Did you have any problems retaining customers?
We did have some downturn in business, but a lot of that is due to the economy, at least here in Pensacola. I wouldn't say any loss of business was attributable to the business transition itself.