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Buy established franchise

Discussion in 'Business, Administration & Management' started by tampasteve, Feb 13, 2018.

  1. tampasteve

    tampasteve Messianic leaning Lutheran Staff Member Red Team - Moderator Supporter

    +1,374
    United States
    Lutheran
    Married
    US-Libertarian
    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.
     
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  2. brinny

    brinny everlovin' shiner of light in dark places Supporter

    +99,305
    Non-Denom
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    US-Constitution
    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: Feb 13, 2018
  3. drich0150

    drich0150 Regular Member

    +333
    United States
    Non-Denom
    Married
    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?
     
  4. grasping the after wind

    grasping the after wind That's grasping after the wind

    +2,460
    Lutheran
    Married
    US-Others
    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.
     
  5. jacks

    jacks Er Victus Supporter

    +661
    Christian
    Married
    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!
     
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