Should I buy buy a new Franchise Territory or should I buy an Existing Location?


This is a question that is not answered near enough by new individuals searching for a franchise and by existing franchisees looking to expand.  This is unfortuante since this question and your ability to determine the right answer can have a tremendous impact on your success or failure.

Now if you are dealing with a Franchise Consultant, you will likely be told that without question that you should buy a new territory.  The reason for this is they know they will not get paid if you decide to buy an existing location from a franchisee that is either failing, downsizing, or struggling to keep his/her head above water.   They get paid by the franchisers for new sales and usually have no way to get paid by any of the existing franchisees looking to sell.  Another issue is that most of the Franchise Consultants that are newer in the business have no clue themselves which is better since the only business experience or franchise experience they have is Franchise Consulting and they got that experience by paying a fee or buying a franchise which gave them the ability to become a Franchise Consultant.  Once again with some homework you can find some good Franchise Consultants one of which is www.tullconsulting.com.  There are more than this but it will take you some homework to locate one that understands this type of consulting and one that is willing to do what is in your best interest and not the consultants.  One way of testing this if you have some understanding is asking loaded questions that you know the answer and see if the consultant is willing to give you bad advice just to get a sale.

I am in the tax business and I am always amazed how many good business people join a franchise and get caught up in the hype and overload of information and never take the time develop a full understanding of the business they are in.  You must understand the budget, Profit and Loss, and Cash Flow of the business you are in or you are going to struggle for a long time or you will get lucky and make it with one location only to ?  How can you make an informed decision on buying a new or existing location if you do not know what profit margin is too be expected on each and more importantly how can you make a choice like this without the ability to calculate how long if ever will you be able to attain a positive cash flow on the business.?  I know this sounds very basic but I see people who after joining a franchise lose the ability to figure these things out and base their decisions on hype and what they have heard rather than facts.

There are many other factors to consider when deciding on new or existing.  One of the big ones that I did not realize when I entered into the franchise world was the benefits of buying an existing location that has been there over 1 year versus opening a brand new location.  Consumers are creatures of habit and people do not either realize that a new location has went in or they are not willing to do business with a brand new location untill they are sure it will survive.  I have purchased existing locations that were struggling and doing terrible and have been able to capitalize on this time factor to turn the location around very quickly because of this very time factor.

On the very next post will be an example of what I am speaking of here.  We will look at buying a new franchise location and buying an existing.  We will examine what things you must look at and how to read that information correctly.

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