– Like Anything In Life, There Are Pros And Cons

Franchise Advantages

Buying a franchise provides resources that can bridge the gap between learning a new business and industry by having a franchise system in place which ensures the likelihood of success through the initial transition years.

The largest benefit of buying a franchise is having that proven system and training for the new owner and their employees. As a franchisee, you don’t have to be the idea man; just follow the system that has the proven success record.

One of the other great advantages is customer exposure by the way of location. One of the resources of almost any franchise is site selection assistance with a professional real estate marketing partner. Having access to a tried and proven demographic model will greatly improve the probability of success.

Franchise Disadvantages

Other than the initial purchase period, and depending on the particular franchise, the franchisor may not provide much assistance or value for the franchisee. The monthly franchise fee, which is between 3-7 percent of gross sales, is mostly allocated to the approved advertising budget. This usually focuses on a national audience and can sometimes be ineffective for the franchisees business and/or area if it doesn’t take into account for current local market trends.

Another disadvantage is the restrictive nature of expanding the business. As the franchisee develops their business, the franchise opportunity often begins to feel confining to an entrepreneurial spirit. Traditionally, it is not possible to implement unique branding or issue process changes into the franchise system.

It is important to ask questions up-front of other owners, vendors, or see an existing franchise location to help answer any of the questions associated with what the owner is willing to accept when moving forward with a franchise purchase.

Exit Strategies Available

Many franchisors have buyout options for franchisees that have outgrown the program. The guidelines of a franchise, the Uniform Franchise Offering Circular (UFOC), will have the procedures for buying out or selling the franchise.
Some franchise programs will even have a transition team that helps sell the franchise, which is often the best opportunity to obtain the highest price when selling the business.

To learn more about franchise business pros and cons get “ENTRANCE“– A Business Owner’s Guide To Buying a Business”, by Alex Vantarakis,


When surveying buyers on why they decided to buy a business, the most common answer is, “I’m tired of working for someone else”.

While being your own boss can be a very rewarding experience, the desire to become a business owner does not automatically mean you should. As an employee with a steady and mostly consistent paycheck, a person can typically just focus on their role in the company and not have to worry about the other facets of running a company.

When becoming a business owner, every decision and responsibility now falls to this person. Being a business owner takes a certain mindset and skillset, and sometimes buyers think they can buy their way to success. Like anything else, buying a business is a process and asking the right questions and creating the right timing for action is critical, even when buying an existing successful business.

Here’s a great article for buyers looking to purchase a business. It details the top questions a person should ask before buying a business.

 


Keeping the Business Deal Alive

Recently, a wealth management professional approached us about a client of his.  This client owned a large industrial distribution business and was being courted over a long period of time by a private equity-backed competitor.  She was interested in selling but wanted to make sure it was the right deal for the right price.  She also did not want to overspend on fees and transaction expenses so she decided to rely only on her attorney to handle all aspects of the transaction.

For over a year, the attorney managed the process of gathering due diligence items, negotiating terms, and preparing transaction paperwork.  This attorney is an excellent and highly-skilled professional, but over time, the process got bogged down as “opposing counsel” scrutinized every item submitted or requested.

The client’s wealth manager had seen this happen before.  When the two parties in a transaction are communicating exclusively through attorneys, it is often impossible to have the necessary open, and off-the-record dialogue to bring a deal to close.

Enter The Vant Group

The wealth manager knew The Vant Group (TVG) and our expertise in avoiding deal killers to bring transactions to a quick and successful closure, and so he introduced us to his client.  Over the course of multiple meetings, we listened to the client and really got to know her and her situation.  We also got to know the buyer to learn their strategy and long-term vision.  Because we have a deep understanding due to extensive experience representing both buyers and sellers, we were able to speak freely with both sides to get past any roadblocks to ensure that our seller got the best deal possible.

From there, we worked with the seller, her financial planner, the buyer, the buyer’s audit firm, and the attorneys from both sides.  Incidentally, the seller’s original attorney was involved throughout the transaction.  Since TVG was quarterbacking the deal, we were able to focus on the multitude of deal details, while the attorneys were able to focus on papering the transaction in the manner that best protected their clients.  The transaction closed, and all parties were happy with the outcome.

After closing, the wealth manager thanked us and told us that the deal “would have never happened” without The Vant Group’s leadership.