Find out how our client quadrupled his profit in 3 months!

Double your profit by backing your business into a franchise

At BusinessResale we have just completed a transaction which involves the growing trend of backing your existing business into an existing, trading franchise.  I though we’d share the story with you:

• We were instructed as the sell-side broker. Sales of franchised letting and estate agencies are our forte, and we have helped some of the major property franchisors to achieve their highest value resales.  We have over 3000 buyers on our database and a call-out to our loyal readers usually generates a good result.
• The business we were selling was a fabulous Northwood franchise operating in Liverpool. The owners had grown it to a 7-figure turnover and consistent profits of over £250k pa.  It was a retirement sale, with the outgoing owners having founded the Liverpool office over 15 years ago.
• The buyer, Shaun, already operated a healthy and profitable lettings company in Liverpool and on the Wirral. At first, he was after an independent business to bolt into his company, but then he did the maths……!    His £75k profit business without an acquisition, = £75k profit.  His business plus a £250k profit acquisition, = £325k profit new business.
• Confession, the maths are not quite that clear-cut, because there’s a 10% franchise fee to deduct from the buyer’s existing business turnover. However, in this case that was more than offset by getting rid of one set of monthly subscription fees to the property portals!  As a result of combining business overheads, there are other economies of scale as well.
• The deal completed on the 1^st Happy buyer, happy seller.  What’s more, a happy franchisor who has thanked the outgoing owners for the rock-solid foundation and legacy that they established, and who welcome the new owner who sees their exit point as his starting point.

It’s no surprise to us that most independent business owners will not look at a franchise resale and dismiss the listing as soon as they see that we are marketing one of the usual franchise brands.  Owners of non-franchise businesses have an understandable level of pride and sense of achievement at having cold-started a brand, driven it through brea

k even and weathered many a storm to survive as an agent on the high street.  Therefore, the thought of the brand fading away to be replaced by the national franchise livery is off-putting to many owners.

However, in a quiet moment I would encourage you to have the internal debate about profit vs brand loyalty.  here are some compelling reasons to look closely at joining one of the big-gun franchisors:

1. Two profits are better than one! Combine business A profit with Business B profit to result in Business A with better profit.  Business B is your independent, so over time it will slowly lose identity.  But, swallow the ego and enjoy the better bank balance.  The maths just work, no question.  Even after allowing for franchise fees on your Gross Profit, the net position will be stronger and economies of scale offered by the merger will probably offset, in entirety, the new monthly franchise fee that your old turnover is now subject to.
2. Are you going national, or staying local? If you’re on a journey towards ownership of a 50-branch agency, then this may not be for you.  (Call us back though when you’re ready to sell because we have your buyer on our books!).  But, if you have more modest local aspirations then consider growing the size of your profits, rapidly, by merging it with a franchise resale.  Your local franchise competitors are probably working in the same territory as you, so any geographical restriction the franchisee may be subject to, probably mirrors the areas you cover from your local office anyway.
3. Buy up other franchise resales. When you see a flurry of franchise resales coming to market, don’t panic!  There’s nothing wrong with the brand or the business, it’s just a matter of timing.  Think of this: most franchisees are corporate mid-life career changers.  I was one of them, aged 38 and leaving behind a stable career to try my luck in business.  Now, the likes of Belvoir, Northwood, Martin and Co, Netwon Fallowell, Whitegates, et al all started franchising in the mid 90s, some 25 years or so ago, meaning that all the early adopters who came on board as franchisees are now likely to be in their late 50s, mid 60s, and thinking about the retirement plan.  Therefore, increasing levels of retirement resales are coming to market.  Once you have backed your business into a franchise resale and are happy the business can operate without you, go and buy a 2^nd territory via another retirement resale.  There will be plenty of them coming to market over the next 1-15 years.
4. Leverage the 10% franchise fee. This is not a cost to your business, it’s an investment in support.  When you are playing golf in Spain, scuba diving in the Maldives or on your world cruise, your branch manager always has someone to call if advice is needed.  Just make sure your manager doesn’t call you, because you will be busy monitoring the air supply in your oxygen tank or trying to cure a slice.  Forget about the autumn marketing campaign, because the franchisor employs some clever people who are pretty good at that type of thing.  They also coordinate the updates for whatever prop-tech you are using, because they have negotiated group rates.  When you are out of growth ideas or need a sounding board, call your business development support team or chat to your fellow franchisees at a regional meeting, unless of course you already have a BDM and a wide support network in your business.
5. Acquisition Support. Some franchisors have assisted purchase schemes to help you win the acquisition.  Others have dedicated outreach desks that hound independent agents for a conversation about being acquired.  We have access to high LTV finance, sometimes up to 100% of the acquisition cost, because the lender knows the franchise is a safe bet.  If the franchisor helps you win an acquisition, your profits increase (happy person no 1), their monthly fee increases (ha
6. ppy person number 2), share value rises (happy person(s) number 3), the resale and asset value of your business increases (back to happy person 1 again!).

So, let’s summarise:  Are you staying local (ish) or aiming at becoming a national brand?  If the former, is your brand more important to you than increased profits and a bigger asset value for your business?  Are you happy with the level of support you are getting to generate marketing campaigns and secure yourself some acquisitions, or could you use some help?  Finally, would you like to double your profit within just the few short months it takes to get your acquisition over the line?

If you’re struggling to find a juicy acquisition, then consider buying a juicy franchise resale.  We have plenty of good listings for you to look at and the end result could is likely to be a pleasant boost for your profit figures.