Buying a franchise
Business

Buying a franchise: the advantages and disadvantages

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Are you planning to buy a franchise? What are the advantages and disadvantages of franchising? Is it a good idea to buy an existing point of sale?

Buying a franchise: the advantages and disadvantages

The benefits of buying a franchise

As is the case with any takeover project (franchise or not!), the main advantage of buying an already installed point of sale is that you can have an immediate and precise vision of the potential of the company . The activity is already running. The point of sale already has customers. Depending on the case, the activity may or may not be improved. The existence of a turnover makes it possible to better establish its business plan . This necessarily makes it easier to obtain your loans since overall, there is less risk of buying an existing structure than creating a new point of sale.

Moreover, the activity immediately generates cash for the entrepreneur . He can thus begin to be remunerated without having to wait.

The other great advantage of a franchise takeover is that you have a quality location from the outset (N°1 or 1bis in the city center or in a shopping center ). This is often difficult to find when it comes to creating from scratch! And a good location is clearly strategic for developing a profitable and profitable business. The visibility of the point of sale is by far a strong argument for developing a business.

The principle of taking over an existing point of sale also makes it possible to validate the concept operationally . The figures for the first years of operation are there to validate the relevance of the products and services. The feedback from the selling franchisee also allows you to better identify the strengths and weaknesses of the brand.

The takeover also makes it possible to get hold of a high-potential geographic area already assigned by the brand to a franchisee.

As part of a conversion, the purchase of a franchise business also has the advantage of being able to rely on competent staff, already trained in the concept . Warning: this advantage can turn into a disadvantage when the staff decides not to follow the new direction.

The main disadvantage of buying a franchise business is the cost of the operation, which is often much higher than for a creation . Indeed, to the price of the company itself, you will have to add the cost of the entry fee. This can possibly be negotiated downwards when the seller agrees to accompany you for a few months, and therefore to train you in the concept.

Overall, be aware that the investment for the takeover of a point of sale is at least 30% higher than that of a creation.

The other major drawback of the franchise takeover formula is the intuitu personae clause that is inseparable from any franchise contract.. What is this clause? The intuitu personæ which can be translated as “in consideration of the person”, personally binds the franchisee and the franchisor by contract. As a result, the franchise contract cannot be assigned by the seller since it is attached to “his person”. If the buyer wants to continue the contract entered into with his seller, he must first obtain the approval of his candidacy from his franchisor. A new franchise contract is then signed, associated with the payment of a new entry fee. This new contract may well be less advantageous than the previous one, particularly in terms of the extent of the area of ​​exclusivity granted.

Moreover, even if the recovery is a priori less risky than a pure creation, the buyer is not immune to a bad deal. Before committing, it is essential that he peels the accounts of the company and the proposed franchise contract. As a result, recovery is often a long process that requires several months of preparation and checks.

Finally, the last disadvantage of taking over a business is that it is sometimes difficult to know if its success comes from the structure itself (installation, staff, location, etc.) or if it comes from the charisma of its boss  ! In the second hypothesis, depending on the case, recovery can become complicated. Customers but also employees may find it difficult to get used to the new management!

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