Buying an existing franchise business is very different to buying any other small business. For one, you are buying a system – one that has been created by someone else. Secondly, there are so many people involved in the buying transaction; the franchisor, the franchise broker, the franchisee selling you the business, and you. Not to mention the bank (if you require finance), your lawyer, their lawyer, your accountant their accountant, and the landlord. What a lot of people to co-ordinate!
So let me give you the lowdown of why all these people are involved.
Generally the first person you will work with is the franchise broker. This is the person who is conducting the sale on behalf of the seller, the franchisee. The broker will supply information about sales, the lease, staffing etc for you to make the decision to buy the business or not.
The franchisee – you will meet the franchisee once you have started to seriously consider the business. At this time you should investigate the premises, observe the staff and look over the equipment. Ask questions about any of the information that the broker has supplied. After this meeting you may want to put in an offer. But don’t get too excited there are still many steps to take.
Before the offer can be fully accepted, you will have to be approved by the franchisor. So you will have to commence their application process and meet all their requirements.
Whilst you are waiting for the franchisor’s approval you can be working on your due diligence which requires you to work with your lawyer and accountant the finance broker and perhaps the landlord as you may need to renegotiate the lease to fit the lending terms required by the bank. You should also do the free pre-entry course.
How many are we up to now? Ah yes 7, but wait there’s more!
Once approved by the franchisor you will need to commence training in the franchise system so please ask to meet your Franchise Business Consultant (this is the person who supports the franchisee) before all the approvals take place. He/she will walk beside you through the training and your first few weeks in the business. This includes in activities such as meeting your staff, and learning the practicalities of running your business.
So once training is all done, contracts and agreements all signed, due diligence complete the settlement can take place. Phew… what a lot of negotiating, backwards and forwards.
On the day of settlement there is much ‘toing’ and ‘froing’ between lawyers, landlords and franchisors.There is a stocktake to conduct and handover of staff. But the good news is that after all this work everyone knows what they are to do and when to do it. If planned properly, the transition is seamless.
From the seller’s point of view and in my experience, the sales process of my existing franchised businesses took nine months each time. So its best not to be in a hurry, best not to get frustrated because it is a process, one in which many people have to do their part. Take your time, understand each component of the journey and enjoy your entry into the franchising world.