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Franchising versus buying an existing business

On Behalf of | Nov 29, 2022 | Real Estate |

Many first-time business owners find the idea of starting a brand new business intimidating. Franchising or purchasing an existing business can make the process of opening your first business easier.

What is the difference between the two?


When you buy a franchise, you are buying the rights to the name, logo and business model of an existing business, but you are not buying the entire business. Franchising agreements typically contain many rules that the franchise operator must follow to maintain the right to use the name or trademark of the business.

When you buy an existing business, you usually get complete control over all operating decisions. However, you do not get the benefit of ongoing guidance and support from the franchisor.

Factors to consider

There are three main factors to consider when deciding whether to buy an existing business or franchise. First, review your finances to determine how much you want to spend. Your budget will significantly impact your options.

Second, make a list of your experience, skills and interests. Inexperienced business owners or people thinking about starting a business in an unfamiliar industry may benefit from the guidance of a franchisor. However, in some cases, the owners of businesses that are for sale may be willing to agree to help a buyer get started with a new business as part of the sales contract.

Finally, make sure you understand what you are getting and what the limitations are before you make a purchase or sign any contracts. Ask the seller about leases, contracts, inventory, cash flow and franchise restrictions.

Both franchising and buying an existing business can work for many new business owners. The right choice for you depends on your preferences and circumstances.