Chances are that you have heard of the shiny object syndrome before. It’s a situation whereby a person pursues every new opportunity that comes his way. Considering the large number of franchise opportunities out there, it will be difficult not to have shiny object syndrome while researching which option suits you best.
Investing in an existing franchise is one of the shiny options you may want to explore. But before you go for the next opportunities you see, here are the pros and cons that you need to consider:
Established Cash Flow
If you’re looking to purchase an existing franchise, it’s crucial that you know the financials of the business you are about to own. No matter the type of franchise you are pursuing, financials are extremely important. It is even more so when you are becoming the owner of an existing franchise.
When you purchase an existing franchise, you might be acquiring positive cash flow or a non-profitable business structure that is difficult to operate. But there’s a higher chance that you will be getting the latter since most profitable franchises are first offered to family members and friends.
That’s why it is important to carry out your due diligence before buying an existing franchise. You also need to note that just because a franchise is based in your area does not make it a solid investment for you.
Established Employees
As a buyer of an existing franchise, you will not only be acquiring the brand name, but you will also be acquiring the employers who help run the business. This can be a huge plus if the workers are properly trained, happy with their jobs, and possess a good work ethic. But if the employees are strongly attached to the present owner, you might experience some backlash when you take the reigns as the new franchise owner. On the other hand, if the employees at the establishment are unhappy, the business can be difficult to operate.
Therefore, you need to know those who are on your team right from the start. With the support of excellent team members, you will be able to operate the business effectively.
Established Reputation
As the new franchise owner, the reputation you will be inheriting can be an advantage or disadvantage based on the type of franchise you choose and the market you are entering.
If the franchise you bought is established in your area, you may not know the kind of reputation it already has. For instance, if you are purchasing a quick-service restaurant and the previous owner or a franchisee close to you does not manage the business well, you might be venturing into a market that doesn’t like that particular franchise. On the flip side, if the previous franchisee has performed exceptionally well and delivered a consistent service throughout the regions, this might be a pro for the existing franchise you are purchasing.
So, it’s important to know the reputation of the existing franchise in the market you are entering.
Research Is Crucial
The bottom line here is that you need to do your research. Check the franchise’s financials, employee situation, and reputation in the market to know what you are acquiring. Make sure to do this before signing the franchise agreement to protect yourself in the long term.
