What advice would you give to other franchisees who have the
opportunity to buy an existing franchise?
I would be absolutely sure of the reputation of that individual
franchise. I would talk to some of their customers and other
franchisees within that organization who have bought existing
businesses to understand what the pitfalls are.
I would do my homework on pricing [and] how to accurately value
the business. Some things to consider, too, are existing lease
agreements that have to be assumed, desirability of your office
location, the possibilities of getting out of that lease, costs,
that type of thing.
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I would also look at business trends in that particular
industry. We ended up buying in the midst of an economic slowdown,
so the volume isn't as great now as it was this time last year,
even with the addition of new customers.
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Whether it's a start-up or existing [location], I would talk
to a minimum of 10 franchisees, and I would choose the ones [the
franchisor] probably doesn't want you to talk to. Usually
they'll give you a list, but they're required on the
franchise agreement to list everybody-that's what I used. I
just went through at random and started calling, I didn't call
the ones they suggested I call-I called the ones that they
didn't tell me to call, and I found out a lot.
What kind of information should you get from existing
franchisees?
There are thousands of questions to ask: How long did it take to
break even? What's your relationship with the franchisor? What
problems have you had? Is it a positive environment? Have you been
satisfied with the support you get from the organization? The
question I asked that got a lot of different answers was, If you
had the chance to do this again, knowing what you know today, would
you do it again? I had some people tell me no.
If you can buy an existing [unit], be sure to find out why the
owner is selling-if it's retirement or physical disability or
if there are some ulterior motives. You really have to dig in to
find out. Overall, between buying an existing location and a
start-up, your goals should be achieved more quickly by buying
existing.
How do you find out the franchisee's reasons for
selling?
You have to ask them. Then, talk to other franchisees. They seem
to be a pretty close-knit group. Everybody knows who everybody is
to some degree, and you can get a good understanding or why the
owner is selling over and above what the individual says. The other
thing I would do is visit at least two of those 10 franchises I
called and spend a day or two in them.
To compare how they operate, things like that?
To compare how they operate, but also to see what it is
you're really getting into as best you can. It takes a while to
figure out what you're really doing, but if you spend a couple
of days in different offices and kind of act like a fly on the
wall, you get an understanding of the day-to-day operations that
will be a large part of your life. It does open your eyes to some
things you didn't consider.
If you were going to open another franchise, would you want
to do a start-up or an existing location?
That's a hard question, because I haven't done both. If
I expanded to another city close to here, it would most likely be a
start-up, just out of necessity. But if I had a choice, I'd
probably buy an existing. If all the factors are positive in both
cases, an existing location would be more desirable.
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