Buy established franchise

tampasteve

Pray for peace in Israel
Christian Forums Staff
Administrator
Angels Team
CF Senior Ambassador
Supporter
May 15, 2017
25,211
7,289
Tampa
✟768,111.00
Country
United States
Faith
Methodist
Marital Status
Married
Politics
US-Others
Over the next 12 months or so I might have the opportunity to buy an established franchise. I do not know the exact financials yet, but I know it is cash flow positive. I am hesitant to buy as I am not sure of how to price the business. A new franchise would cost $45K and include all new equipment, training, and a territory with national accounts. The territory is good, however, the franchise is around 10 years old, so I assume most of the equipment is too. There is no office, simply a mini warehouse, van, and equipment. Certification training would be $2,800. I am not sure how many direct customers he has, but he operates in national accounts of which there are plenty in the area.

Does anyone have any advice on this? I have plenty of experience (10 years) running a business, but not in buying one that is established and a franchise.
 
  • Like
Reactions: brinny

brinny

everlovin' shiner of light in dark places
Supporter
Mar 23, 2004
248,786
114,476
✟1,339,895.00
Faith
Non-Denom
Marital Status
Private
Politics
US-Constitution
Over the next 12 months or so I might have the opportunity to buy an established franchise. I do not know the exact financials yet, but I know it is cash flow positive. I am hesitant to buy as I am not sure of how to price the business. A new franchise would cost $45K and include all new equipment, training, and a territory with national accounts. The territory is good, however, the franchise is around 10 years old, so I assume most of the equipment is too. There is no office, simply a mini warehouse, van, and equipment. Certification training would be $2,800. I am not sure how many direct customers he has, but he operates in national accounts of which there are plenty in the area.

Does anyone have any advice on this? I have plenty of experience (10 years) running a business, but not in buying one that is established and a franchise.

i don't have any advice, but Dave Ramsey might. His expertise and gifting in financial matters, and his wisdom, is a blessing. Check him out. He has a website, and he's on Youtube.

Praying that God grants you extraordinary wisdom, discernment, and clarity, and that He guides your every thought, word, or deed.

God bless you.
 
Last edited:
Upvote 0

drich0150

Regular Member
Mar 16, 2008
6,407
437
Florida
✟44,834.00
Country
United States
Faith
Non-Denom
Marital Status
Married
Politics
US-Republican
is this to do with food or food prep? most refrigeration related equipment has about a 10 year life span.. also ask to see the books. not an uncommon or unfair request. run the numbers see if it will make sense. see what replacement costs will be. is their a truck or van? 10 years if the life span out of them. If you can't recoup your replacement investment and make a living then this is a bad deal in a reasonable amount of time?
 
Upvote 0

grasping the after wind

That's grasping after the wind
Jan 18, 2010
19,458
6,354
Clarence Center NY USA
✟237,637.00
Faith
Lutheran
Marital Status
Married
Politics
US-Others
is this to do with food or food prep? most refrigeration related equipment has about a 10 year life span.. also ask to see the books. not an uncommon or unfair request. run the numbers see if it will make sense. see what replacement costs will be. is their a truck or van? 10 years if the life span out of them. If you can't recoup your replacement investment and make a living then this is a bad deal in a reasonable amount of time?

Good advice. When dealing with a franchisor you ought to be able to research what has been said by those that have dealt with them in the past. Some franchises are to be avoided at all costs as the only one making money are those selling the franchises. Since the person selling the franchise in this case is a franchisee himself and has been at it for 10 years, I would expect there is a good chance it can be profitable. Just make sure that the selling price is commensurate with the value of the franchise.
 
Upvote 0

jacks

Er Victus
Supporter
Jun 29, 2010
3,790
3,035
Northwest US
✟665,851.00
Faith
Christian
Marital Status
Married
Politics
US-Others
Pricing a business can be difficult. Two basic ways is to look at the current market (not book value)value of the hard assets you will obtain. (BTW my advice pay little or nothing for "good will.") Another way is to look at the present value of it's projected cash flow. It is imperative that you that you see actual tax returns for the business. Accept no other form of profit and loss and don't believe any statements about "not all income is reported" or "expenses are padded", etc. The only thing you can legitimately add back to the net income would be depreciation. Also with a franchise you want to contact the franchisor (not ee) and find out all that will be required of you and if it O.K. to purchase the business.

I would also suggest checking out the SBA. They have a lot of on-line help and can even set you up with free business consulting. Hope this all works out for you!
 
Upvote 0