A resale is a franchise that is already up and running, but it is up for sale as a going concern. A major advantage of a resale franchise is that you get income from the day you own it, which is in huge contrast to the usual start-up franchise in a new territory, where you have to build your business from the ground up. Even with the skilled help of an experienced franchisor, it typically takes a new start-up franchisee 12 to 18 months to get into profit.
Later, we’ll meet one new franchisee who has gone from city broker to lawn care specialist with his new franchise resale business.
Resales on the up
Resales are becoming more common. Our latest survey figures [1], sponsored by NIC Local, show that in 2024, 66% of franchisors expected to offer at least one resale unit. That’s a big jump from 51% in 2018, so there are more resales for serious buyers to choose from.
BFA resales campaign [2]
To address the increase in resales in the market place, we’ve recently teamed up with BusinessesForSale.com, the UK’s largest business resale marketplace, and HSBC UK bank, which has a specialised franchise team, to offer practical and financial advice about investing in a resale.
The BFA Next Chapter: Franchise Resales campaign provides advice on buying a resale and lists live opportunities from trusted BFA member brands across the UK, with details of the investment required and a map so you can see what’s available and where.
Why we care [3]
As the UK’s leading authority on franchising, we are dedicated to upholding ethical business practices and high standards. Established in 1977, we empower businesses and individuals through accreditation, education, and expert guidance. We work hard to help people choose the right franchise for them.
But first check whether a resale is what you really want.
Resale pros and cons
A resale is an established business with a track record, a trading history that can be checked, trained staff, local brand awareness and an existing customer base, so if you’re the sort of person who can hit the ground running and ideally have business experience (not necessarily in the same sector as your chosen franchise) a resale could suit you.
However, as you are buying an ongoing concern, you will need to invest more money than the same franchise bought as a start-up, because you are paying for the business contracts, assets, access to an existing consumer base and the experience of its staff.
That said, banks will consider lending suitable investors the funds to buy a healthy resale. You will also need the management skills to walk into your new business and run it effectively, from day one, and the capacity to win the confidence of your inherited staff quickly.
Doing the deal
Usually, you negotiate directly with the exiting franchisee, but often the franchisor will have a right of approval of any new franchisees. Find out early on if the franchisor has any particular requirements or restrictions.
Do your homework
It pays to do deep research to find out why the business is up for sale. Is it that the existing franchisee is retiring, wants to sell for personal reasons (such as divorce or illness) or is it just that franchising and that brand wasn’t for them? It’s important that you understand and go into the investment with your eyes wide open!
Check the numbers
“Detailed financial research is imperative, so you have a clear understanding of what you are acquiring,” says Gillian Morris, UK Head of Franchising at HSBC UK.
Is the business ready for sale?
“Are operations’ manuals, financial, management and performance information up to date and easily accessible?” says Morris. Any reluctance by the seller to produce information should make you think twice.
Talk to the network
Consult several franchisees in the network, if possible. They may know the inside story of why a franchise is up for sale and can give you an insight into the business, the brand and the franchisor.
Independent valuation
Morris recommends that you consult an independent valuer who can give practical advice and guidance on valuation, consider what payment terms will be acceptable, and, if the purchase price is sourced from debt and cash, look realistically at how much debt the business can afford to repay.
Get expert legal advice
Consult franchise law specialists, who can explain the fine details of the contract of sale, and check for fees and obligations that you should know about. The BFA site has a list [4] of affiliated franchise lawyers, accountants and advisors on their website here.
Case study success: From city broker to suburban gardener with a franchise resale
After 20 years in the fast-paced world of city broking, Dan Murfet recently swapped the trading floor for turf care as the new Surrey franchisee with lawn care and treatment specialist Greensleeves.
Dan’s resale franchise means he has inherited a well-established customer base of around 600 clients.
Dan says: “I chose the resale route because one was available, and a brand-new territory wasn’t. But more than that, it was already a proven business with steady, recurring income – a far better starting point than £0 – and it still has plenty of room to grow.”
Potential for growth
The previous owner had gradually stepped back from expanding the business in the run-up to retirement, and Dan sees clear potential to take the territory to new heights.
“My goal is to build on what’s already been established and push the business forward, without disrupting what works.”
His best friend Sam Thwaites, who runs the Greensleeves Clyde Coast territory, told Dan that having a solid foundation in place from day one would make a world of difference compared to starting from the ground up.
Full training
Dan says: “The training and ongoing support has been thorough and professional – exactly what you need when starting something new.”
New heights
Cheryl Harper, Managing Director of Greensleeves, added: “We’re excited to see how Dan develops the territory and know he has the drive to take the business to new levels of success.”
See live franchise resale opportunities on our website at https://www.thebfa.org/bfa-campaigns/next-chapters/.
[1] https://www.thebfa.org/product/the-british-franchise-journal-2024/
