Derrick on the advantages of buying a franchise resale...
“People looking at franchising should consider a resale because of the fact that the business is already trading, so there are customers from day one, there’s cash flow from day one, there is brand presence in the marketplace from day one, and, if it’s appropriate to have staff, then there will be staff in the business from day one.
“So the business is ready to go. You’re not starting from scratch, having to create a business, create a market, having to recruit staff and go out and get customers from a zero base.”
On the cost of buying a resale compared to starting a franchise business from scratch...
“With a new business you’re starting from scratch. There will be cash-flow requirements as the business goes on.
“With an existing business, a resale, yes you’re paying a bit more for the business but you’ll need less working capital because the business is generating cash all the time. So while it may cost more up front, in the long term it may not cost much more.”
On the information they should be given about the business...
“They [the franchisee] will need to have signed a non-disclosure or a confidentiality agreement first. Before they sign that they would get a simple, one-page estate agents flier.
“But after signing the agreement they would get a full pack of information, which should contain the history of the business, obviously a copy of the accounts, how the business has grown, details of the territory – because most franchises are territory-based, so postcode analysis and things like that – and the general background of the business. Anything about the property and the staff etc.
“So anything that would allow them to analyse the business and decide if it’s being offered at the right price.”