Have you ever heard of shiny object syndrome? It happens when someone suddenly whips his head in the direction of every new opportunity. With so many franchise opportunities available today, it’s hard to avoid having shiny object syndrome as you research which option is right for you.
Buying an existing franchise is one of those particularly shiny objects and attractive possibilities. But before you jump at the next opportunity that presents itself, consider the pros and cons.
Established Cash Flow
Before you ever buy an existing franchise, it’s important that you understand the financials you’re about to inherit. Financials are important regardless of which franchise you buy, but as you step into the role of owner of an existing franchise, they’re even more critical.
When buying an existing franchise, you could be gaining positive cash flow, or you could be gaining a less than profitable business structure that’s hard to manage.The latter is more common since most profitable franchises are first sold to friends and family members.
Do your due financial diligence. Just because a franchise is established in your area doesn’t mean it’s a strong investment.
Established Staff
When you take over an existing franchise in your area, you won’t just acquire a name. You’ll also acquire the employees who work there. This could be a pro if the employees are happy, well-trained, and have a strong work ethic. However, if the employees have a strong bond to the current owners, you could see some backlash once you step into the role of franchisee. On the flipside, if the employees are disgruntled, you could be entering an operational nightmare.
Knowing who is on your team from the getgo is critical. If you have excellent team members, you’ll be in an excellent spot operationally. If not, you might have to do some shuffling to get your team on track.
Established Reputation
The reputation you’re picking up can be a pro or a con depending on which existing franchise you buy and the market you’re buying it in.
If the existing franchise has roots in your area, you never know what type of reputation has been established in the past. For example, if you’re buying a quick serve franchise and the past owners, or a franchisee nearby, hasn’t run the operation smoothly, you could be entering into a market who has a distaste for that specific franchise. On the other hand, if the franchisee has done an exceptional job and there’s consistent delivery of service across all regions, this could be a positive for the franchise you’re buying.
Understanding the reputation of the franchise in the market you’re considering setting up shop is critical.
Research is Key
The key here is to do your research. Looking at financials, employee satisfaction, and reputation can give you a better idea of what you’re buying into. Do this before signing on the dotted line and you’ll protect yourself in the long run.
Susan Guillory is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.