Franchise opportunities

Submitted by Fayaz on Mon, 12/08/2008 - 11:07am.

 

You would think that buying an established franchise would make a great buying opportunity and generally speaking that is correct. But sometimes things go wrong and we all wonder why we did not see the signals ahead of time. So what is going on here?
 
In a nutshell the biggest problem in buying an existing franchise business is a failure to do your homework in the following areas:
 
Inaccurate cash flow analysis (Owner compensation, debt service)
Paying far too much over market price (A Franchise Valuation can be a good guide)
Cursory due diligence investigation on the franchisor ( Cuppy’s, Quizno’s, Curves)
Inadequate comparisons of industry competitors and newcomers
Relying entirely on what your Uncle says instead of getting an independent second opinion
Joining a franchise which is already past maturity and saturated, without territorial protection
Not interviewing a cross section of franchise owners and experts and keeping an open mind
Improper structuring of the deal as an all cash event, without any seller financing
 
There are plenty of good franchises out there for resale. Read my article on this topic on this site, and submit your questions to me
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