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franchise resale is a business already established in its territory that has, most usually, been operated by the owner for the duration of the current franchise
agreement with no plans to renew the licence and so is on the market as a going concern. As territories are snapped up, this kind of franchise investment is, logically, on the increase. According to Derrick Simpson of Franchise Resales, a consultancy for buyers and sellers of established territories, and their franchisors, the trend is set to continue. He says: “As the UK franchise sector matures it is predicted there will be about a 12 per cent turnover of the franchise population per year – a great opportunity for new franchisees to join a network with a ready-made business.” There are many reasons why an existing franchise comes on the market, and they are generally positive ones. As Derrick Simpson notes: “Having resales available is not a sign the network is ailing, it is simply a factor of the life cycle of franchisees and one that most franchisors recognise and expect as their networks of franchisees mature. There are some franchises where there are no new territories available so all its
transactions are resales.”
As with a new territory investment, aspects such as the tried-and-tested model, franchisor support and brand name are all present in a resale. But furthermore they also offer: marketplace
That a franchise becomes resold is part of the business’s natural life cycle. As franchisor and managing director of the Bardon Group Nigel Toplis notes: “Whenever I interview a prospective franchisee one of the questions I always ask them is: ‘when do you want to get out?’ At the end of the day, unless they pass it on to a family member, everybody needs to sell their business and it pays to have this as an objective from day one. “Resales, therefore, are an integral part of franchising. By accepting the fact that one day the business will be sold, the franchisee should not look simply to take cash out of the
business, but rather continue to invest in it in order to build a capital asset. “The franchisee who purchases a resale gets, a ‘ready-made’ business with staff, customers and income from day one. The franchisor gets a younger, fresher franchisee with all the drive, enthusiasm and ambition of the original franchisee when they started. It is important to remember that when you buy a resale franchise you inherit all the advantages of a business in operation – working staff, a working system, database of active customers.” Here, four franchisees discuss their experience of running a resale.
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John Bate, 59, runs a Minster Cleaning Services franchise in Nottingham. After working with his wife as a co- director in a health and beauty spa business that
was established in 1980. Looking to stay in a service-oriented business, he took over from the Minster resale in 2011.
successful franchisee for many years. I trusted his frank and honest opinion and have certainly not been disappointed. Moreover, I am highly delighted to have been
What attracted you to a resale? Starting a new business in these tough trading times would be somewhat amount of start-up capital almost impossible with the banks in their current mindset. A resale opportunity already crosses many of the bridges I’d otherwise have faced.
resale in particular? I bought an 18-year-old established business. It came with an existing customer staff, an established infrastructure, trading premises and a good return. I was able to hit the ground running from day one and concentrate on moving the business forward quickly without many of the worries of a start-up. Furthermore, the banks are much a proven track record.
How has business been so far? Business so far has been challenging – in the main due to the economic climate – but it has seen growth especially in our targeted sectors and turnover is ahead of last year and set to continue.
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Why did you go into franchising, and why in this sector?
A franchise business is like a strong extended family; the franchisor being the head or parents, offering guidance, stability, experience, support and leadership and the franchisees the closely-related family members working together for the long-term success of the family. I joined the cleaning sector as it allowed me to continue working in a service-driven business and because to many companies, it is an absolute necessity.
What was it about a Minster franchise that appealed? I joined Minster following a recommendation from a close friend who has been a very
Describe a typical day challenges arising from the management and supervision of more than 100 cleaning operatives. If someone calls in sick, has family problems or is away, the cleaning contracts a team of travelling relief cleaners to cover all outstanding jobs, which can be many and varied. In addition, we make regular daily visits to our existing customers and those potential new customers who require a quotation for our services. Never a dull day!
How do you see business developing in the future?
I’m optimistic about the future despite the doom and gloom in the news. We have many ancillary services to offer existing customers and of course to promote to our potential new ones. Our aim is to provide a one-stop shop for anything cleaning related.
Any advice for others considering a resale? Having agreed to purchase a resale business, I would strongly advise that a specialist franchise solicitor is used who understands the intricacies of franchise agreements,
November 2012 |
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