Buying an Existing Business vs. Buying a Franchise

Buying an existing business and purchasing a new franchise are two very different paths to business ownership.

An existing business may provide customers, employees, equipment, operating history and immediate revenue. A franchise may provide training, operating systems, brand resources and ongoing support—but a new location must still establish its own customer base and become profitable.

Neither choice is automatically safer or better. The right path depends on your experience, finances, desired level of control, need for support and ability to manage either a business transition or a new launch.

As both a business broker and franchise advisor, I understand the advantages and challenges of each option. My role is to help you compare them objectively and determine which path best fits your goals.

Purchasing an existing business allows you to step into an operation that someone else has already built. Depending on the business, you may acquire its equipment, inventory, lease, customer relationships, employees, vendor accounts, operating procedures and goodwill.

Potential Advantages 

• Existing revenue: The business may be generating sales from the day ownership transfers. 
• Business-specific financial history: Tax returns, profit-and-loss statements, bank records, point-of-sale reports and other documents may help you evaluate performance. 
• Established customers: You may acquire a customer base that has taken years to develop. 
• Trained employees: Existing employees may provide continuity and operational knowledge. 
• Known operating expenses: Rent, payroll, utilities, insurance and other expenses can often be estimated from actual records. 
• Existing location and equipment: The facility, lease, equipment, permits and supplier relationships may already be in place. 
• Greater control: You can generally change pricing, products, suppliers, branding and operating procedures without franchisor approval. 
• No franchise royalties: An independent business does not ordinarily pay ongoing franchise fees. 

• Inherited problems: Weak employees, poor reviews, outdated equipment, unfavorable contracts or operational problems can transfer with the business. 
• Questionable financial information: Some sellers maintain incomplete records or claim income that cannot be verified. 
• Dependence on the seller: Customers, employees or vendors may be loyal to the current owner rather than the business itself. 
• Transition risk: Important employees or customers may leave after the ownership change. 
• Outdated systems: The business may require new technology, updated marketing or operational improvements. 
• Limited ongoing support: Seller training is generally temporary. After the transition, you are responsible for operating the business. 
• Potential hidden costs: Deferred maintenance, inventory shortages, lease issues and working-capital needs may not be obvious initially. 
• Paying for goodwill: Part of the purchase price may represent the reputation and earning power developed by the seller.

An existing business may fit someone who: 

• Wants the possibility of revenue shortly after taking ownership 
• Is comfortable reviewing and questioning financial records 
• Can manage employees through an ownership transition 
• Wants greater control over operating decisions 
• Can identify opportunities to improve an established company 
• Is willing to negotiate price, terms and seller training 
• Can operate without long-term guidance from a franchisor 
• Is comfortable inheriting systems that may be imperfect 
• Understands that “existing” does not necessarily mean “turnkey” 

This option may be a poor fit for someone who wants extensive training, dislikes ambiguous financial information or expects the business to continue performing without active leadership.

As a business broker, I help owners sell and buyers evaluate existing businesses. I understand the importance of reviewing financial performance, owner involvement, employees, leases, equipment, customer concentration and the reasons behind a sale.

As a franchise advisor, I help prospective owners explore participating franchise opportunities, compare business models and navigate the franchise-investigation process.

I have also personally started and operated businesses across multiple industries. This combination gives me firsthand insight into independent startups, existing-business acquisitions and franchise ownership.

My goal is not to persuade every person to buy a franchise. It is to help you understand which type of opportunity best matches your experience, finances, goals and preferred way of operating.

I am happy to discuss both options with you.  I can help you investigate opportunities at no cost to you. If you purchase a participating franchise that I introduce, I am compensated by the franchisor.

Compensation and representation for an existing-business transaction depend on the particular listing and brokerage arrangement and will be explained before services are provided.