When you start the process of looking for a business to buy, you obviously already know or love the type of business you intend to own and operate. It’s a dream for many but a reality for few. In the midst of your decision process you also have to decide — franchise or not?
Buying a franchised business is probably best for someone who is more comfortable in a structured business environment. This could be a person who has left a corporate job for self-employment, but is used to the corporate structure. Another big advantage of buying a franchise is the fact that you are buying a business which has operated well under a franchise umbrella. You aren’t starting a franchise from scratch, and you are taking advantage of the name recognition of your franchisor to support your business. The downside for some is the cost of buying a franchise.
Some business buyers object to paying royalties to the franchisor. Established franchises are normally priced according to the cash flow of the business, and royalties and other expenses will be deducted from the income, resulting in an adjusted cash flow. Many franchise buyers find that royalties were not a big factor in the final business decision because the income from the established business exceeded these costs.
Another factor when buying a franchise is the need to follow the procedures of the franchisor. This can include uniforms for employees, packaging, marketing procedures, and the need to redecorate or refurbish the business on a regular schedule. The upside of these rules is that you often can take advantage of the size of the franchisor to get supplies and materials at reduced costs.
If this structure and needing to follow the rules of a franchisor gives you heartburn, you might be better owning a non-franchised business. As a buyer, you will still get access to the financials of the business to help you determine if the business is strong and viable. A non-franchised business may not be any riskier than a franchise … they are simply different.
If this discussion leaves you uncertain about your best path, contact Hallmark Business Brokers and discuss your needs with us. We are experts in connecting qualified business buyers and sellers and will help you find your ideal business!