Buying a Franchise: New or Existing?
Purchasing a franchise is a great way to go into business for yourself. You get the benefits of an established company, successful marketing plan and loyal following; plus the added help from the franchisor. When buying a franchise, you basically have 2 options: buy an established, existing one or get a fresh start with a new one. Here are a few advantages of both options for you to consider, so that you can make the best decision when purchasing a franchise.
An existing franchise will come equipped with a marketing plan, a successful track record and an existing customer base. It comes with a bunch of advantages, and may be the better choice for some entrepreneurs.
1. Proven track record.
Existing franchises are typically purchased from the current owner or the franchisor, so you can ask for a proven track record of profit. Ask for hard data and numbers that will give you an idea of the profitability of the business. You can see for yourself how much you could stand to make and factoring your own operating costs.
2. Established customer base.
Having a loyal customer base is a big benefit for an existing franchise, and a huge plus for any business owner. With a franchise, you are buying into a brand that customers are already familiar with. You can leverage that existing relationship and the ongoing advertising efforts of the franchisor to push your business forward.
A new franchise is just starting out, so it will come with higher risks. However, the higher risks also mean there’s more potential for higher rewards. Building a new franchise does have its set of risks, but it also comes with some advantages that an existing franchise just doesn’t offer.
1. A clean slate.
Since an existing franchise comes with an established reputation, there is always the chance that there were a few weak points in the way the previous owner ran things. A new franchise will offer you a clean slate that is free of old habits and bad reviews. You will have to work a little harder to establish your reputation, but you will be free of any past negativity that could haunt your business.
2. Lower price.
A big customer following and a well-known business name are added values, which can hike up the price of a franchise. Since there is no customer base yet, new franchises are often less costly than a pre-established one.
3. Newer facilities and equipment.
Since the business is new, it’s very likely that the facility and all the equipment will be new as well. Though older, outdated equipment should not completely turn you off from an existing franchise, it is important to keep in mind that it could be something that will require repairs later down the line.
When buying a franchise, the decision to buy new or used is an important one. Each option has its own set of advantages, and they should be carefully weighed when making such a large decision. Ultimately, your business personality and goals will be used to make the final decision, but the pros and cons of each type should be taken into account.
Written By Brad Denton
Gunderson, Denton & Peterson, P.C.
1930 N. Arboleda, Suite 201
Mesa, Arizona 85213
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