Opening up to Franchising

August 31, 2024

by a searcher from Lee University in Chattanooga, TN, USA

I recently had a deal fall apart just before closing. It was for good reason but a painful experience none the less. I have now been exploring the franchising space. To my surprise I have even found franchises that are heavily B2B. All the brands I am considering are service businesses. Am I endanger of marrying my rebound after a bad break up or is franchising a valid option with plenty of potential?

1 Like

23 Replies

224 Views

Replies

Reply by an investor
from New York University in New York, NY, USA

By franchising, are you talking about a resale opportunity with an existing franchisee, or a new unit / territory from the franchisor? Two very different paths. I think resale opportunities can be interesting options for ETA, but need to find the right one as if they aren't scooped up by someone already in the network there might be a reason. As compared to buying an independent business, you are going to have more ongoing support and potentially "brand name" recognition when buying an existing franchise, though there are the trade-offs of potential limits on geographic expansion, service offering expansion, growth through bolt-ons, etc. If you are considering buying a new unit / territory from the franchisor, that is more like a start-up, though some of the start-up risk is mitigated given you are getting what is hopefully a proven playbook that can be replicated, so at least the concept is proven.

Reply by a searcher
from University of Maryland at College Park in Washington, DC, USA

Thanks for the tag, Luke. Franchise resales are also on the table for my search. I am still learning and not entirely a pro. Still, I have been leaning on my mentors to help guide me through the EtA process, which is similar to buying an independent business, except you account for yearly franchise fees when doing valuation modeling. I would look at the FDD and see their fees, litigation history, Item 19, and what legal actions they will take against you if you don't do certain things. I would also look at the customer review and again analyze the franchise agreement. Acquisition Minds has an episode with a round table of franchise owners who all bought resales, and I found that conversation insightful. Happy Hunting!

+21 more replies.

Join the discussion