The purchase of an existing franchise in Ontario, Canada can be a completely different experience from the purchase of a non-franchised business. Successful existing franchises offer a lot of security to the buyer for the following reasons:
- The existing franchise has a proven business model and system that work. Not only the brand and the system have already been proven by the success of the franchise but the location has also been proven because this is an existing franchise. So, the risk that efficiency and/or profitability decreases after the purchase is reasonably low.
- The franchised business is much less dependant on its current owner. Most franchises have systems that have been improved over the years. This systems have been designed to be less dependant on skillful employees, especially the owners. All employees are trained through the system without needing specialized skills. So, the risk of the buyer having hard time learning the business or being dependant on a key employee who could leave is very low.
- Customers are more loyal to the franchise brand than to the seller himself. Successful franchises have well know brands that draw a lot of customers. Clients do not care about who owns the franchise. Therefore the risk of loosing some customer after the purchase is very minimal.
- The buyer gets the assistance of the franchisor in the transition. The buyer will be trained how to operate the business by the best trainers.
- The Buyer is protected from making a mistake in choosing the wrong business for him/her. The franchisers will not approve the buyer if they believe he/she is not a good fit for the business. This is a reassurance for the buyer that he/she is making the right investment decision.
Unfortunately, despite these positive aspects, the purchase of an existing franchise presents some real challenges:
- The purchase process is longer and more complicated. The need for the franchisor's approval takes more time and sometime can even prevent a transaction from closing. Furthermore, franchisor are generally more interested in selling new franchises than in approving the transfer of existing ones. This lack of incentives from the franchisor's perspective, makes it very hard for the buyer to comply with all the laws and regulations of the franchise. Sometimes, the financial requirement are so high and irrelevant to the purchase of an existing franchise that very few buyers qualify. For example franchisers will use the same criteria for the transfer of a franchises that those for the purchase of a new franchise, which generally requires larger initial investments.
- Franchise regulations for the operation of the business could be suffocating. Some times a franchisee could be compared to a simple employee of the franchiser. Franchisees do not enjoy the freedom of normal business owners.
There are two different way to search existing franchises available for sale.
- Contacting franchisors directly is probably an efficient way. You can check a large list of franchises for sale in the Canadian Franchise Association.
- Searching the Internet for websites for businesses for sale in your geographical location.