Trying to decide between buying an existing franchise business or starting fresh? Well, lots of people have found themselves in the same position.
In this post, I’ll share some of things I know about each.
That way, you’ll have more information to decide what’s best for you.
Resale Franchise vs. New Franchise
If you’re at a crossroads between investing in a franchise resale or a franchise startup, three of the main questions you need to ask yourself should include:
- Which path will lead to fewer headaches for me?
- What model will help me break even faster?
- Which path will make me more money?
Of course there are more, but these three questions are a good start.
Let’s start by looking at buying a franchise resale.
The Established Route: Buying an Existing Franchise
One way to think of buying an existing franchise is like moving into a fully furnished house. Someone's already done the heavy lifting.
But in the case of a franchise, the previous franchisee has:
- Built a customer base (hopefully highly-profitable loyal ones)
- Trained a staff who know the ropes
- Worked out the daily operational kinks
- Established positive local vendor relationships
- Created a business with verifiable performance records
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The Biggest Advantage of an Existing Franchise
You're getting a business with a pulse.
Plus, there's (typically) immediate cash flow rather than waiting to break even on a startup franchise.
But here's the kicker: You need to find out why the current owner is selling. And it’s not always easy.
Sometimes it's innocent: Retirement, health issues, or pursuing new ventures. Other times... well, let's just say not everyone sells their winners. So, there’s that.
Now, let’s look at buying a new, startup franchise.
Starting Fresh: Building a New Franchise From the Ground Up
Starting fresh means exactly that – everything is new, untouched, and waiting for your entrepreneurial fingerprint. You'll:
- Choose your own location (within franchisor guidelines)
- Hire and train your own team
- Implement your local marketing
- Network in the local community for visibility
Plus, you’ll be the face of a brand-new business opening in your area. Which is actually pretty exciting.
The Numbers Game: Comparing Investment Realities
Let's talk money. That's what this is ultimately about, right?
Existing franchises often cost more upfront than starting fresh.
Why? Because you're paying for goodwill, established equipment knowledge, and the privilege of skipping the speedbumps that often occur in the beginning months.
But the math isn't always straightforward. For instance, a new franchise requires:
- The initial franchise fee ($35,000-$50,000 typically)
- Real estate purchase/leasing costs
- Construction/build-out expenses
- Equipment purchases
- Initial inventory
- Grand opening marketing blitz
Meanwhile, an existing franchise purchase includes:
- The business's current market value (often 2-3x yearly profit)
- Transfer fees to the franchisor (usually lower than initial franchise fees)
- Possible renovation costs to meet current brand standards
Pro tip: Existing franchisees sometimes finance part of the purchase themselves, which can improve your cash flow position dramatically compared to bank-only financing for a new build.
Due Diligence: What's Your Best Franchise Investment
Whether buying existing or starting fresh, your most valuable currency is thorough research.
Research tips for resale franchises:
- Request at least three years of financial statements
- Speak with employees (with permission)
- Talk to lots of other franchisees in the system about the location
- Understand why the current owner is selling
- Review the commercial lease transfer terms carefully
Research tips for new franchises:
- Carefully go over the Franchise Disclosure Document
- Talk with multiple existing franchisees (happy AND unhappy ones)
- Understand territory protection policies
- Evaluate the competition in your target area
- Verify franchisor claims about startup timelines
The Personality Factor in Franchising
Here's something franchisors don't emphasize enough: your personality matters in this decision. For instance:
- Are you a builder who loves creating something from nothing? The fresh start might energize you.
- Are you more of a fixer who enjoys optimizing existing systems? An underperforming resale could be your perfect match.
- Do you crave stability and predictability? A well-running existing location might help you sleep better at night.
The Bottom Line
Neither option is inherently better. The "right" choice for you depends on your financial situation, risk tolerance, skill set, and personal preferences.
The smartest move?
Consider both paths simultaneously and explore available franchise resales while also investigating new development opportunities. The perfect match might surprise you.
Remember: Experience shows that you're not just buying a business, you're buying your daily work life for the next several years. Choose accordingly.
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The Franchise King®, Joel Libava, is a top franchise expert. He’s written over 2,000 different articles on franchise ownership and personally consults with people who are looking to buy a profitable franchise. Go here to find out how The Franchise King® can help you become your own boss.