Franchises proven to resell for more

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The researchers examined over two thousand business resales over a decade. They found that franchise resale prices were 1.5 times higher than non-franchised businesses. Small businesses in the horeca franchise industry’s (non-grocery) category sold at .5 times higher price than other personal and professional small business categories.

The study was led by Dr. John P. Hayes from the the Rinker School in West Palm Beach, Floria, who also acts as the director of PBA’s Titus Centre for Franchising.

“There have been numerous studies about small-business development and drivers for success in business,” Hayes said, “but not much research that examines small-business resales. With the aging of franchising comes more resales of franchise businesses, so we decided to look at that topic specifically. Our research focused on the variables that may have a positive impact on the value of a small business resale.”

Dr Hayes believes the peer-reviewed findings confirm a branded franchise adds long term value for the small-business owner. “If two people operate the same type of business over a period of years and enjoy similar sales, the franchise business is more likely to sell at a higher price point. Business owners ought to be aware of that information in advance of launching a business.”

Advantages of a franchise resale

There are many benefits to a franchise resale. Some of these include:

·       A track record that will help you create accurate revenue forecasts. 

·       The premises have already been built out and furnished.

·       You already have customers, a workforce and a supplier network.

There are other advantages. For example, with a franchise resale, you avoid the stress and initial low revenue of working through the start-up period. You’ve got a franchisor backing with marketing, customer-service advice, materials ordering, and trouble-shooting. Revenue flow will have been established as the site is already up and running. 

Many potential investors fear that a franchise resale means they’re trying to rescue a business that might be in decline, however, franchise resales can pop up for many reasons. Maybe the franchise owner is burned out, has a health challenge, plans to retire, or simply wants a new challenge, etc. 

Do your homework

Before buying a franchise remember to do your research as buyer and learn what will expected of you as a franchisee. For example, do you have the necessary capital in hand to qualify for the purchase? Ask the franchisee and the franchisor why the unit is being sold? Do your own research about your territory and find out what competition exists nearby. Figure out whether there is a solid customer base you can attract in your territory. 

Finally, do some soul-searching. Are you the type of person who will follow the franchisor’s proven steps for success?

Author

Adam Braksator

Journalist