Buying a franchise business for sale can a good
investment for the right buyer.
There are some common mistakes that buyers of franchises make that can be
avoided. This article examines some of
the more common errors to keep at the top of your mind.
Mistake
#1. Not using a
lawyer
It is highly recommended that you use the services of a lawyer when you are contemplating buying a franchise business. There are many documents to be reviewed such
as leases or sub-leases and the franchise disclosure, which, by law, must be
provided to a buyer in the Province of Ontario.
Mistake
#2. Assuming that purchase
financing will be there
It can be
easier to finance a franchise business than a non-franchised one but this does
not mean that financing is assured.
Certainly there are many lending programs tailored to franchises but you
should talk to a lender early in the process.
You still need to be qualified and have sufficient cash recourses on hand to consummate a deal.
Mistake
#3. Size does not always
matter
There is
a perception in the marketplace that the bigger the franchise organization, the
better the chances of success. This is
not always the case. Sometimes smaller
organizations offer great value to an investor and a very compelling value proposition. Bigger is not always the best way to go.
Mistake
#4. Success in a franchise is
guaranteed
There is
no guarantee of success in business - any business. When you buy a business, there is always the element of risk
present. Going into a franchise group
may mitigate some of the risks in running the business, but
not all. The onus is still on you to
properly operate your store, manage employees and generate revenue and profit. There is no guarantee.
Mistake
#5. It will be an easier business
to sell
Selling a
business can be challenging. Some
franchise businesses that are popular, profitable, growing, managed
properly and priced correctly may be easier to sell. Do not let this fool you though, if your
franchised operation does not have all of these factors aligned then it
certainly will be a challenging business to sell. Talk to a business broker to discuss the
opportunities on the franchise re-sale market.
Mistake
#6. Expecting too
much
As a franchisee
you would (typically) pay a royalty as well as a marketing or advertising fee
to the franchisor. Because of the
advertising fee that is paid, some owners feel that all of the marketing work
is being done for them. This is not
always the case. There may be
significant local market opportunities for you to explore. Talk to the franchisor, learn what local
marketing initiatives are available to you. Make sure that they fall in line with the
terms of the franchise relationship.
There are
many misconceptions about franchising in the marketplace. Before you make any decisions please work
with your professional advisors. Also, talk to a business broker and visit different trade shows
and events. The Canadian Franchise Association
has great resources and events where you can learn more.
Businesses for sale in Toronto, Hamilton and surrounding areas in
southern Ontario, Canada. We are a full
service business brokerage here to help you buy or sell a business.
Article Source: Article alley
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