Franchising is a popular business model in Canada, offering entrepreneurs the chance to own a business with an established brand and proven systems. While many people think of franchising as opening a brand-new location, another common option is purchasing a franchise resale. A franchise resale allows buyers to step into an existing operation rather than starting from the beginning. For many Canadians, this approach can offer a smoother entry into business ownership. This article explains what a franchise resale is, how it works, and why it may be an appealing option.
Definition of a Franchise Resale
A franchise resale is the sale of an existing franchise location from one franchisee to another. Instead of buying the rights to open a new franchise unit, the buyer takes over a business that is already up and running. The franchise brand remains the same, and the new owner operates the business under the franchisor’s system and standards.
In most cases, the franchisor must approve the resale. This ensures the new owner meets the brand’s financial, operational, and training requirements. Although the ownership changes, the franchise continues to operate as part of the same franchise network.
How Franchise Resales Work
The resale process usually begins when a current franchisee decides to sell their business. This may be due to retirement, relocation, or a desire to pursue other opportunities. The franchisee lists the business for sale, often with the franchisor’s knowledge or assistance.
A potential buyer reviews the business’s financial performance, lease terms, staff structure, and local market conditions. If both parties agree on a purchase price, the buyer applies for approval from the franchisor. Once approved, the buyer completes training and signs a franchise agreement. Ownership is then transferred, and the buyer begins operating the franchise.
Benefits of Buying a Franchise Resale
One of the biggest advantages of a franchise resale is that the business is already established. It may have existing customers, trained employees, and steady revenue. This reduces the uncertainty that often comes with opening a new business. Buyers can also review past financial records, which helps them make more informed decisions.
Another benefit is faster income potential. Since the location is already open, the new owner can begin generating revenue immediately. For Canadians who want to avoid the startup phase, a resale can provide a more predictable path to business ownership.
Challenges to Consider
Despite the benefits, franchise resales also come with challenges. The purchase price may be higher than the cost of opening a new franchise because it includes goodwill and an operating business. Buyers must also understand why the current owner is selling, as this may reveal potential issues.
There may be operational challenges to address, such as outdated equipment, staffing concerns, or local competition. In some cases, the franchisor may require upgrades or renovations as part of the transfer process, which can increase costs.
The Role of the Franchisor
The franchisor plays a key role in franchise resales. Most franchise agreements give the franchisor the right to approve or reject a buyer. The franchisor may also require the buyer to sign a new franchise agreement with updated terms.
Franchisors often provide training and transition support to help the new owner succeed. This involvement helps maintain brand consistency and protects the franchise system as a whole.
Is a Franchise Resale Right for You?
A franchise resale can be a good option for Canadians who want a business with existing operations and lower startup risk. However, it still requires careful review and due diligence. Buyers should examine financial records, speak with the franchisor, and seek professional advice before making a decision.
Conclusion
A franchise resale is the purchase of an existing franchise business from a current owner. It offers a practical alternative to starting a new franchise and can provide faster revenue and greater predictability. While there are risks and costs to consider, franchise resales remain a popular option for Canadians looking to enter franchising with an established business.
