Let’s assume you’re in the market for a small ongoing concern costing around £25k
Is the seller cashing out for genuine reasons? Get that question answered first and foremost. You have to know why it’s for sale. Whatever answer you are given you then need to satisfy yourself that it is genuine.
Next, you’ve gotta love the Franchisor. You’ll most likely have to meet them anyway as they’re the only ones who can grant the license. But you’ll be working with them, closer than you might think. So make sure you’re going to get along!
Next check the franchise agreement. How long is left? Technically all you can buy is the unexpired term if the agreement so it’s a good idea to check if the Franchisor will grant you a full term should you go ahead and buy it.
Next ring a random selection of the current franchisee network. Be sure to ask them how many they know of who have failed. You can use the wayback machine to check the franchisors website two years ago and see who was in the network then. Speaking to an ex franchisee is always a great way to discover some home truths. But don’t believe the whingers, they might not be accurate in what they are saying. I’ve often found that failed franchisees hardly ever confess that it was their fault, it’s usually everyone elses fault. They can’t all be right! Once you’ve spoke to a few you can work out which comments have merit from those that don’t.
Check the legal agreement and if you’re not too savvy with these things yourself, as most aren’t, get professional advice on it. The franchise agreement is one document, you’ll need either a termination agreement or a novation agreement to assign the rights over to you or your company.
Halve your forecasts and double your costs. It’s more of a saying than a precise strategy but as my Dad used to say if the bottom line looks good when you under estimate sales and overstate costs then you’re probably going to be ok. #Oracle
Next find someone who’ll throw cold water over you. Metaphorically speaking that is. It’s good to speak to someone who’ll give you a reality check. Whilst we’re on this subject be sure to get the backing of your wife/husband/significant other. You don’t want any arguments down the line … “I told you so” etc
We’re getting serious now so whatever price the buyer wants you need to agree a lower one if you can. Or have a go at deferring some of the price, or paying for it out of future profits.
Thanks go too Dogancan Ozturan for the photo which we got from Unsplash