Are Resale Franchises ‘Safer’ Business Opportunities?
At Visiting Angels®, we have a range of business opportunities for prospective franchisees. Some of these opportunities are undeveloped territories, giving you the chance to start a franchise from scratch. Others are franchise resales, active units that have been listed for sale by the current owner or owners.
A lot of prospective franchisees have heard or read that’s it’s smarter to buy an existing business than start one from scratch. But when they talk to our team, they’re unsure whether this applies to franchises. After all, buying or starting a franchise isn’t quite the same as buying or starting an independent business.
So they end up asking us, “Are resale franchises safer business opportunities compared to starting a new franchise? Or does this not apply to franchise businesses?”
To answer that question, we’ll need to start with three disclaimers:
- First, when it comes to business opportunities, ‘safe’ is always a relative term. Any business can fail, and there’s no guarantee that a profitable franchise today will remain profitable tomorrow.
- Second, while there are some rules of thumb about which types of resale franchises are safest, every business is unique and needs to be evaluated on its own merits.
- Third, rather than lump resale franchises all together, it’s easier to think of them as existing along a quality spectrum. Toward one end of the spectrum, resale franchises tend to be sounder investments than a new franchise. But on the other end of the spectrum, resale franchises can carry more risk.
Resale Franchises as ‘Safe’ Business Opportunities
As a general rule, the best resale franchises are safer business opportunities than starting a new franchise. All of the question marks that come with a new franchise have already been answered, and all of the riskiest steps have already been navigated. If the previous franchisee (or franchisees) did everything right, you have a lot more certainty than if you’re starting a franchise fresh.
Plus, you’ll skip the start-up phase, among the riskiest periods in a company’s life cycle.
Of course, increased certainty and safety both come at a cost. The stronger an existing franchise is, the more you can expect to pay on a resale purchase. And this number will likely be a lot higher than the cost of starting a new franchise.
You also need to ask why the current owner is selling the franchise in the first place.
There are plenty of good reasons why a franchise might sell a thriving business. Perhaps they’re retiring? Maybe they want to spend more time on personal projects? Or maybe they’re looking for different types of business opportunities to invest in?
But there are also cases where a resale franchise looks healthy at first glance while harboring hidden issues. If you aren’t sure why the current owner is selling, it’s important to ask.
When Resale Franchises Start to Get Risky
A “safe” resale franchise tends to be a safer investment than a new franchise. Likewise, a resale franchise with red flags will often carry more risk than starting a new franchise in a similar market.
Once again, the reasons should be somewhat obvious. When you start a new business, you need to create strong systems, develop a capable team, and build a strong reputation for your brand. It can be easier to start a business from scratch rather than trying to adjust ineffective systems, manage unqualified or demoralized staff members, or repair a broken a reputation.
That said, there are times when a franchise only requires minor tweaks to fix its shortcomings. In these cases, you can pick up a struggling franchise at a modest price, update it quickly and affordably, and recoup a generous return on your investment.
These types of resale franchises will be safer business opportunities than a mismanaged franchise. And in some cases, they’re preferable to starting a new franchise from scratch.
Learn more about business opportunities with Visiting Angels by calling us today at 800-365-4189 or contacting us online.