As you search for a franchise, you may have noticed existing
locations already for sale in Canada. A franchisee may decide to
sell their business for many reasons, including retirement or poor
store performance. Before you decide to invest in an existing
franchise instead of getting a new location, here are the potential
downsides and upsides of doing so.
The common downsides
All businesses have risks, even a franchise location that is
already up and running. While the downsides below should not
immediately stop you from buying an existing franchise, they are
areas you need to explore further before you make your final choice
to help reduce your risk and exposure.
- A higher price: A successful, already-established franchise
location may cost a lot more than one you started yourself.
Granted, it can also come with faster revenue streams, but that may
not work in your situation.
- Hidden problems: Typically, a franchisor is involved in a
franchise resale, which should offer you some guidance. However,
you need to discover exactly why the franchisee wants to sell. Are
the profits too slim? Does the location or brand have a poor
reputation? Is it nearly impossible to find employees?
- Management change: Change in any business can be difficult at
times. Employees and even customers may resist the change in
management at the location. You need to have a plan in place to
combat the potential loss of customers and workers.
The typical upsides
A pre-existing franchise can
be a great way to enter the franchise market. If everything is
above board, there are many benefits to investing in an established
- Smoother financing: Even though you may need more financing
than you anticipated, it is often easier to get when you have a
business with an established history.
- Faster opening: Unlike a new location, the seller of the
franchise already has it up and running. For a home-based brand,
this means the operations and processes are already in place and
- Existing customer base: When you are starting from scratch, you
need to build a customer base for revenue. With an existing
location, that revenue stream is already there and just waiting for
you to grow it.
- Proven market: When you invest in a current franchise that is
successful, the market has already been tested for you.
Of course, you still need to look into an existing franchise
before you invest, just as you would to buy a brand-new franchise.
Even if the location seems absolutely perfect, you never know just
what your own due diligence could uncover.