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Buying An Existing Franchise & Passing It Down

“Shirtsleeves to shirtsleeves in three generations” is how Americans describe the high failure rate of family businesses—a phenomenon noted in many cultures. Brazil “Pai rico, filho nobre, neto pobre” (Rich father, noble son, poor grandson) China “Fu bu guo san dai” (Wealth never survives three generations) Mexico “Padre bodeguero, hijo caballero, nieto pordiosero” (Father merchant, son gentleman, grandson beggar) Italy “Dalle stalle alle stelle alle stalle” (From the stables to the stars and back to the stables) I am often contacted with this request “can you find me a business – preferably an existing business with cash flow – that I can purchase and grow with the intent of having my family work in it” The answer is a resounding yes. With over 3000 different franchised brands in the United States, you have a wide variety of opportunities to investigate. Based upon what you are trying to achieve, this list will narrow significantly. If you would like to discuss what’s out there – just call me - I can help you with this. However, before we start looking, there are 2 major areas that must be carefully considered and investigated

  1. The Plan

  2. The Purchase

The Plan: In the United States, a familiar aphorism—“Shirtsleeves to shirtsleeves in three generations”—describes the propensity of family-owned enterprises to fail by the time the founder’s grandchildren have taken charge. Variations on that phrase appear in other languages, too. The data support the saying. Some 70% of family-owned businesses fail or are sold before the second generation gets a chance to take over. Just 10% remain active, privately held companies for the third generation to lead. Much of my work centers around helping families put a plan together to articulate what the founder (probably you who are reading this email!) are looking to accomplish and IS a franchise the right vehicle to help you get there. For many people it is not. Once we can understand IF a franchise is right – we can then put a plan in place to articulate your goals and use them to identify quality franchise systems that can help you get there. The Purchase: There are several ways you can look to understand what an asset is worth:

  1. The Income Approach

  2. The Market Approach

  3. The Asset-Based Approach

Different opportunities will need a different valuation approach. If you would like a comprehensive powerpoint on how to value an existing business – just email me and I will be happy to send it to you. If you would like to have a straight shooting conversation about how to understand the world of franchising, please feel free to contact me by clicking on the logo below.