While I am not necessarily a fan of buying a new franchise, I have always marveled at the concept behind franchises. I believe, in theory, that they provide an exceptionally solid platform for the structure of a business and the fundamentals to a franchise can be a great resource to test any business you consider buying. Specifically, can a buyer take the individual components and build a system for success that will allow them to grow the business either with the present model or possibly achieve growth by duplicating the model in other locations.
Often times, business buyers falsely convince themselves of all of the wonderful things they can implement to a business for sale and they sell themselves on everything the seller has supposedly done wrong. Conversely, they may look and past failed attempts to grow the business and believe there is no future opportunity. The result of either of these approaches usually proves to be ineffective because until you are immersed in the business and get a “gut feel” for the operations, the industry, the clients, vendors, and products/services, it is impossible to formulate a viable vision or business plan.
However, any buyer can use the franchise model to effectively analyze the business from several components including whether or not the systems currently in place can be improved to increase the business.
Are the employees properly trained? Are there mechanisms in place to measure new marketing initiatives? What has the seller done specifically to try and grow the business? Which ones worked; which ones failed; and why?
It is common to encounter businesses for sale where the revenues and profits have either declined or not shown any recent growth. This is especially true in today’s economy. However, that alone does not necessarily dictate the future of the business. Often, business owners go into cruise control mode and simply give up their initial zeal for the business. They get comfortable with the business as it is. Or, they get tainted when new initiatives do not yield the results they had hoped for when they were planned and launched.
Personally, I love buying businesses where the owners have become complacent, as long as doing so has not caused the business to spiral downward beyond repair. Prospective business buyers are generally amazed at how often this is the case as they begin searching businesses for sale. Buyers should seek a business with a solid base, one that I term to be a “good” business that perhaps has reached a level of mediocrity under the current owner.
Having solid fundamentals in place and then using the franchise model, the concept then becomes whether or not a buyer can take the positive ingredients of the business and build a profitable recipe.
Once you identify a business that will allow you to do this, you have an excellent opportunity available to acquire a business that can become great with you as the new owner.
Have a great week!
Richard Parker – diomo.com