Should I Buy a Franchised Business or a Non-Franchised Business?

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When you make the decision to purchase a business, you start to look for the obvious………something you enjoy, profitable with a fair asking price.  Owning a business is a dream many share and is a life changing experience for many families.  

As you are searching for a business, you may find some that are franchises.  Should you buy a franchise?  That is not a simple question to answer, as it depends on the individual.  Having sold many types and sizes of businesses over the years, it has stayed exciting for me because of the ability to meet business owners, learn about businesses, and work with the personalities and qualifications of buyers.  The greatest satisfaction is successfully matching a buyer and seller and knowing the business will continue to be successful and grow.  There is not a definite set of statements to determine whether a franchised or a non-franchised business is the right choice for you.  I have found, however, that individuals who leave corporate jobs after many years of working there tend to fit very comfortably into franchises. They, along with individuals who are more comfortable in very structured businesses, like the order and knowing things will be done a certain way.  Many people think of franchises as fast food, but there are actually franchises for almost any type of business in which you might be interested.  Rather than list them here, I refer you to look at franchises on this website, BusinessBroker.net.  Information is available on a large number of franchises.

A complaint heard often is the idea of paying royalties to the franchisor.  If you are looking at an established franchised business, the asking price is based primarily on the cash flow of the business, as is the non-franchised business.  Those royalties and any other expenses will be deducted from the income, so you will be looking at the adjusted cash flow for both.  You may be surprised to find the royalties paid were not really a factor, as being associated with the franchisor brings in more than enough revenue to offset the royalties.

When buying a franchise, you will own a business with resources of a proven franchise.  Included in the asking price will be the franchise fee, which will be listed as an asset of the business.  You will be buying a protected territory, which means the franchisor will not allow another franchisee to sell in your area.  You must follow the franchisor’s policies, which may include uniforms, packaging, and marketing materials.  A non-franchised business will likely have these in place, also.  The difference is the franchised business must continue with certain things and not make changes without franchisor approval.  You will also be required to redecorate periodically.  This is not a bad thing, as your business stays fresh and up to date.  Another advantage is that you are part of a large group and not just your single business, so you take advantage of purchasing your supplies cheaper because of bulk buying by the franchisor.  Remember, whether you are buying a franchised business or a non-franchised business, each will have financials and adjusted cash flows with all income, expenses, and adjustments to help determine the value of the business.   

If you are thinking of starting a business, there is less risk and many benefits if you buy a start-up franchise.  The franchisor does the research to find the demographics and perfect location for the franchise.  A plan is in place for you to follow, and you have the benefit of the franchisor’s advice and........expertise.  You also have brand recognition and help developing your customer base.  This website is a great place to search for franchises and is clear and easy to follow; so whether you are looking for information on a non-franchised business, a franchised business, or thinking of starting a new franchised business, this website is a good place to start.  You are making a decision that can change your life, and any of these three choices could be right for you.  Weigh the benefits of each.  It is a personal choice.

  • Author: Pat Jones
  • Title: President/Owner - Business Broker
  • Company: Pat Jones Business Brokers
  • Company Website: http://www.patjones.biz/
  • Date: October 19, 2017
  • Category: Buying a Franchise or Business
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