then wishes to sell, multiples of the initial outlay should be recouped based on the businesses success. Buying a resale is a slightly different story, requiring a greater amount of due diligence by the purchaser, and a more robust breaking down of the figures – particularly turnover and profit. The upside to buying a resale however is that it is much easier to see how well a business has performed, versus how well a new business is likely to perform. It’s an important distinction. What it means is that, while buying a new franchise can to some extent be ‘finger in the wind stuff’ – very chilly at this time of year – buying a resale is more heartwarming in the sense that you know the track record of the business at the start. And with detailed provision of information by the seller, and careful assessment you, the prospective purchaser, will be able to unpick the business and see if there are areas where it can be improved: has the former franchisee been as hot on local marketing as you intend to be? Are there logistical elements to the business that can be tweaked to boost performance? What were the former franchisee’s personal circumstances – had they suffered illness or gone through a divorce? These are all things to consider when purchasing a resale as they give clues as to where you might be able to take the business in the future. And it’s imperative to look at the business from all angles. A bit like buying a house – you need to see it at different times of the day and different times of the week. You’re making an investment, and you


want it to be as informed as possible. Once you’ve put ink on paper, you don’t want to discover that all of your imagined nightmares are quite real. Which is why using a service such as that provided by Franchise Resales Limited genuinely helps to smooth what could otherwise be a challenging process for franchise sellers, potential franchise buyers, and franchisors. In a nutshell, sellers require a structured


“Buying a resale is heartwarming in the sense that you know the track record of the business”


buoyed the coffers and added value to their businesses. It’s one of the things I impress upon


would-be investors looking at buying a franchise for the first time. Primarily


they will think about it as a source of income, which of course it is. But buying a franchise is also a real investment, one that, with the right level of input, should ensure the business appreciates in value over the term of the franchise agreement. Buying a new franchise, one with a


territory for example, will involve the initial franchise fee payment, and will then require the input of the franchisee who, with the support of the franchisor, should market and grow the business until it is profitable. If, after five years – the typical term of a franchise agreement – the franchisee


approach because they want a swift and smooth sale of the franchise they’ve worked to build; buyers do because they want to invest in a going concern but need to understand the detail of that business; and franchisors want an experienced third party to handle the complex resale processes and remove the headaches that can come from brokering a franchise resale. n


Derrick Simpson


To find out what resales are available see page 84 or contact Derrick Simpson on derricks@franchiseresales.co.uk


February 2012 | Businessfranchise.com | 75


FRANCHISE RESALES To be included call 020 8394 5283


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