Steps To Buying a Franchise Resale
So you’ve decided to buy a resale franchise and already have an idea of what type of company you want to run, and what region you want to operate in. Now begins the search for the right unit and purchasing it at a reasonable price. Buying a resale franchise is a unique transaction in that it involves three parties: you, the franchisee, and the franchisor. But the process is not overly complicated, and this article will go through the procedure of buying a resale franchise.
Obtain the Prospectus of Sale
Before you make an offer, you of course need to be fully informed on the state of the business you’re looking at. Ask for the prospectus of sale and you’ll have all the information you need in one convenient package. If you have a business broker, he or she should be able to get you a prospectus with no problem.
A well written prospectus will have everything you want to know from cash flow statements, to inventory levels, to info on staff levels and remuneration. Read it thoroughly to determine if the business is on good footing, and if it’s one that you can take to the next level.
Determine a Fair Valuation
The prospectus will list the asking price for the company. The franchisee should have sought some guidance in determining a fair price because putting a solid number on a business’s worth isn’t an exact science. There are many factors involved and some of them are hard to quantify.To determine if the price is fair or not, enlist the help on your accountant for a third party opinion. Consider the price of a new franchise and compare it to what the franchisor is asking. It will be higher, but that is only because you have all the advantages of buying a resale franchise. Develop an idea of what you think is a fair business valuation, and then it’s onto the next stage.
The fact that you can negotiate the price is one of the great advantages of resale franchises. You might be nervous about going into this, but be confident and know that most often negotiations are a friendly procedure. Be mindful that both parties have each other’s best interest in mind—the franchisor wants to sell and you want to buy, so both parties should be willing to bend just a little bit. Don’t be dead set on sticking to your guns. Negotiations require a more diplomatic mindset.
Sale and Purchase Agreement
Once you’ve both agreed on the selling price, a simple handshake isn’t enough to seal the deal (although it is nice). A Sale and Purchase Agreement must be drafted and signed by both parties. The franchisor comes into to play here. You’ll need them to sign off on the agreement as well. With that settled, you’re on your way to owning and operating your resale franchise.
These are the steps to buying a franchise resale. Take a look and find a great resale opportunity in your area on BeTheBoss.ca Franchise Resales.