Like all things in life, there are always list of the top this or that. Franchises are no different and can be put in list like most popular, range of cost and ease of purchase. Business brokers also have their own favorites to show prospective clients.
If a potential franchise buyer is thinking about buying a franchise, then looking at rankings by various categories makes sense, as it will let them learn a great deal by comparing different franchises. The Internet is a great place to learn a lot from these list in a short amount of time.
Types of franchises
There are many different franchises besides the fast food ones that most people are aware of like the hamburger chains, the chicken franchises and the seafood places. There are many different retail type franchises, service franchises, trade type franchises and tax prepares. In fact almost any business type you can think of has a franchise competitor. Some of these franchises have a very high rate of success. Some may depend mainly on the individual that buys it such as a service business. If the owner is good at prospecting and selling their service they will be successful. It they are not good at it they may not make it, as the franchise is not well enough known to bring in enough customers. This accounts for the lower ranking of many of the franchises a person has never heard of and had no idea they even existed.
Ratings by cost of the franchise
A person can buy a franchise for as low as a couple of thousand dollars and the price goes up from there to well over a million dollars for some of the name restaurants. The low cost franchises seem to be home based and a single person operation. What many of them offer is just a business plan on how to do the business. This can be a steep cost for a plan with no other support or help.
At the high end you get training, on going support, a serious edge on being successful as these franchises have a very high percentage of success.
Popularity of these high end cost franchises also accounts for the fact that they sell at the upper end of the range. The success rate is high so they are popular.
Their popularity means the franchise company can get more money for them than the lower cost franchises. It is all about future success to the new owner and getting his investment back via profits.
Ease of purchase ratings
Low cost franchises are higher in the ratings since it takes less money to buy. Higher cost franchises may be more difficult to buy unless the buyer can arrange financing privately or through the franchise people. An investor group or a very well off private party usually buys the really high price franchises. Low cost franchises will sell on terms as they have little further cost in the franchise. The higher priced one will help a great deal in finding the money for a buyer they feel will do well with the franchise. They have over time developed all kinds of finance help from lenders to investor groups. They are really interested in selling to people they think will be good franchise owners. They want to have networks of successful franchises.
Business brokers have a selection of businesses to choose from Businesses brokers usually represent sellers who have an existing business they wish to sell. Their lists are varied among all of the types of businesses at a range of selling prices. When a buyer comes to them they can show buyers businesses that are in trouble and ones that are prime examples of a successful operation. They also have all types of businesses for sale, so the buyer is presented a choice of business types. This could be advantageous as the buyer may see something in the list that they have not thought of or even considered.
The business broker if experienced will have a very good idea of the real worth of the businesses that he represents. It is very likely professional evaluators arrived at the selling price. The prices have some fudge factor built in, but they are closer to the real value than a guess.
The great many choices these brokers are able to show prospective buyers should work to the buyer’s benefit. The choices are many and of all types of businesses that could be considered for purchase. This ability to look at all types of businesses at the same time and compare prices and potential investment return is one of the reasons that all buyers should at least have a discussion with a business broker or two.
These conversations will cost nothing, but they can help the buyer make better choices between a startup franchise and an existing business.
Talk with other franchise owners
If you have narrowed the businesses to certain franchises, it would be wise to speak with owners of other similar franchises. The information they will provide will help you make a better decision When you find out what they like and don’t like about the franchise, this is excellent material to think about. There is nothing like being warned about areas of contention and possible discontent in running a franchise. At least it will give you areas to question with the franchise people. After the sale is not the time to find out about problems you were not aware of and it certainly is not the time to be surprised. You may also find that there is room for some negotiation on the franchise price that was supposedly set in stone. Nothing is always locked in stone. Something that is claimed to be company policy is just that. It is an arbitrative decision and was not handed down from on high. Policies are changed all the time within companies. If you really do not like the policy walk away and find a different deal.
Looking at the ratings of franchises by different criteria will give the buyer many ways to look at different franchise opportunities. Comparisons by different means help the buyer get a perspective on the business they may get no other way. Looking at price ranges and understanding what they really mean is an eye opener to the buyer of a franchise. The fluff in the price can be guessed at by comparing different franchises. Also popularity and success seem to have some degree of predictability.
Taking the time to discuss what the business broker may have in his client list may be more than worthwhile. There may be a business on the list that the buyer never considered that would be better suited to the buyer’s needs and pocketbook. You will not know unless you look.
Use the Internet for comparing the different franchises. This is the fastest and easiest way to do the comparisons. Any information you want on the franchise business can be found on the net. This is a superb source for franchise information, stats and ratings. The net makes finding any information you want available by searching for it through a search engine.
About the Author
Bill Henthorn formerly was principal broker and owner of a resort / commercial real estate brokerage in Honolulu which specialized in representing sellers in transactions up to $50MM.He currently serves as the marketing director of http://www.acquireo.com
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