Franchise resales: how to evaluate an existing unit for sale
Buying an existing unit can save time and give you immediate revenue, but it comes with its own risks. A careful evaluation helps you judge whether the business is healthy or if you are inheriting someone else's problems.
Advantages of resales
- Faster opening timeline
- Existing customer base
- Trained staff already in place
- Seller disclosures available
- Easier to finance in some cases
Risks and hidden liabilities
- Declining sales masked by short-term fixes
- Poor lease terms
- High payroll or rent relative to revenue
- Aging equipment
- Cultural issues within the staff
Ask why the owner is selling. Retirement, relocation, or health issues are cleaner explanations than consistent underperformance.
Financial documents to review
Request:
- Profit and loss statements for the past three years
- Tax returns
- Payroll summaries
- Royalty and marketing fee reports
- Inventory lists
Look at year-over-year trends, not just recent months.
Operational questions to ask
- How stable is the staff?
- What does turnover look like?
- Are maintenance or repair costs rising?
- Have there been any recent customer complaints or service issues?
Territory and lease considerations
Check:
- Remaining lease term
- Rent increases
- Conditions for assignment
- Territory protection rules
A bad lease can offset the value of strong sales.
Takeaway
A resale can be a smart entry point if the fundamentals are solid. Focus on the numbers, the lease, and the staff. If any of those look shaky, step back.