Buying a franchise is a major decision. One that will affect you financially and change your lifestyle. Based on years of experience helping people buy businesses, Franchise Brokerage Services has identified several commonly asked questions. The information below is designed to aid you in identifying a business you like and understanding the franchise purchase process. If you have any questions about buying a business, please contact us.
1. Why should I buy an existing franchise?
A big advantage in buying an existing franchise, versus starting a new franchise, is that an existing franchise typically has existing cash flow, established customer and vendor relationships, trained employees and market-proven products and services.
2. What things should I know as a franchise buyer?
At Franchise Brokerage Services, we are advocates of finding a franchise that you will like and you will feel comfortable owning and managing. You, like every other prospective buyer, have a vision of being your own boss and calling your own shots.
Let’s assume that you find a franchise that you like, its location is ideal. Because of poor management, the business may not show the greatest track record. Purchased for the right price and on the right terms, this business could become more successful with proper management, it is a great way to achieve your vision of being in business for yourself.
As a prospective franchise buyer, you will be concerned as to why the business owner is selling the business. Franchise owners sell for a variety of reasons: retirement, poor health, relocation or simply being ready to move on. If it is a good business for you, the reason for the sale is not that important.
Finally, be aware that most businesses typically sell for less than their listed asking price. If it’s a business you like, don’t be afraid to make what you consider to be a reasonable offer.
Remember, Franchise Brokerage Services advisors are trained, experienced professionals. Utilize your broker’s talents and call your broker whenever you need assistance or have questions about buying a franchise.
3. Why should I use Franchise Brokerage Services?
Franchise Brokerage Services is dedicated to providing you with superior service throughout the entire buying process. FBS’s in-house process makes the transition from prospective business buyer to new business owner smooth and less complicated. At any given time, we have thousands of business for sale listings throughout our Franchise Network. Our brokers work with you to find the business that best matches your goals and financial needs, while also providing key benefits to you as a buyer:
– Business brokers save you time and money.
– Business brokers keep the buying process moving.
– FBS has more business for sale listings than any other Franchise Broker Organization.
4. How can FBS assist me in locating and purchasing a business?
A Franchise Brokerage Services advisor will provide you access to hundreds of franchise-for-sale opportunities, then they help you identify businesses that suit your monetary and lifestyle requirements, ones that should be appropriate for your business skills and experience. FBS will help you understand and navigate the complexities of the buying process, facilitating negotiations between you and the seller.
5. What are Franchise Brokerage Services fees?
Your Franchise Brokerage Services advisor is a representative of the seller, they are paid by the seller. There is no direct cost to the buyer to utilize a FBS broker. Because of FBS’s market presence and expertise, buyers often engage a Sunbelt broker to perform a targeted search for a business not currently listed for sale to find an owner willing to consider a purchase offer. Under rare circumstances, the broker is a representative of the buyer and the buyer is responsible for paying the broker fee. For a targeted search, you can typically count on a minimum retainer and a commission as a percentage of the sales price at closing.
6. What information do I need to provide in order to learn more about a particular franchise?
The information you will be required to provide in order to obtain detailed information on a business listed for sale will vary, it will depend on the size of the business, the complexity and competitiveness of the industry, the disposition of the seller and other factors. Under any circumstance, safeguarding the confidentiality of the seller is absolutely essential. It is a responsibility that Sunbelt Franchise Brokers takes seriously. For this reason, each and every prospective buyer must provide the following items (at a minimum) before receiving additional information on a business that interests them:
Personal Financial Statement: Your Franchise Brokerage Services broker may require this document to determine business opportunities that suit your personal financial circumstances. This information will also be necessary to structure purchase offers and to seek financing when buying a business.
Confidentiality and Non-Disclosure Agreement: These documents identify your responsibilities and obligations as a prospective buyer concerning any confidential information disclosed about a business listed for sale by Sunbelt.
7. What are the requirements for SBA loans?
Even though the SBA-qualifying standards are more flexible than other types of loans, lenders will generally ask for certain information before deciding to use an SBA loan program. Generally, lenders will need the following documentation to evaluate your loan request:
Business Profile: A document describing type of business, annual sales, number of employees, length of time in business and ownership. Sunbelt Business Brokers will help collect this information.
Loan Request: A description of how loan funds will be used, which should include purpose, amount and type of loan.
Collateral: Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.
Business Financial Statements: Complete financial statements including income statements and balance sheets for the past three years and current interim financial statements. SBA will also require cash flow projections indicating how much cash an owner operator can expect to generate to repay the loan, as well as accounts receivable and “payable aging” statements. Your Sunbelt Business Broker will request this information.
Personal Financial Statements: Statements of owners, partners, officers and stockholders owning 20% or more of the business. The strength and accuracy of your financial statements will be the primary basis for the lending decision. Be sure that yours are carefully prepared and up-to-date.
Source: Small Business Administration, www.sba.gov.
8. What are the steps of the due diligence process?
Due diligence should be an extensive and thorough process. We strongly recommend consulting your attorney and accountant for a complete explanation.
- General Information
- Organizational Matters
- Litigation Issues
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- Intellectual Property
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- Budgets and Forecasts
- Material Agreements and Documentation
- Sales and Marketing
- Employee Compensation and Benefits
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- Lease / Real Estate Matters