If you’re looking to acquire a new franchise operation, don’t forget about the option of purchasing a resale. All the hassles of starting up a new store --- from real estate issues to construction headaches --- have been eliminated. You’ll have to pony up a premium for such a store, but it can prove a sound investment.
That’s what Phil Mang and his wife Sue, discovered with their purchase of a Blimpie unit just outside the University of Southern Illinois campus, where Sue worked in human resources. Months earlier Phil had lost his job as a metallurgist when the steel plant for which he worked for 27 years shut its doors, leaving its workers stranded.
"We went bankrupt and lost our pensions and benefits," he says. At 45 he needed to start over. He heard from a colleague that the Blimpie store was for sale. Years before, the couple had frequented the shop, but had noticed its atmosphere had gone downhill as it changed hands. Yet they knew the place had potential.
After doing their homework, which included looking at a few competitors and deciding that Blimpie’s territory provisions were more generous, the Mangs decided to pursue the resale. They fixed up the shop, changing its lighting and signage, and adding music, and focused their marketing efforts on the university. It proved a smart career move.
A little over a year later, the couple moved to St. Augustine, Florida, to open up two more units. Though they originally hoped that they would end up owning more than one unit, they had no idea the expansion plan would take them to Florida, where both have parents. "We saw an opportunity and took it," he says.
That’s not to say that all resales come with a guarantee of success. A resale can hypothetically work in everyone’s best interests. There are times, for example, when a franchisor is convinced that a struggling operation could do so much better with a different franchisee. But this "new blood" scenario only makes sense for the new franchisee candidate when there’s no doubt that the former franchisee can indeed be found responsible for laying whatever obstacles to success tripped up the unit.
"If you’re the new blood in the situation, you want to make sure the problem relates to how the business was being run," says consultant Robert Puccio. For example, the dynamic of a neighborhood could be evolving to the point where any franchisee will falter, despite his or her best efforts.
It’s necessary to understand exactly why a franchise is available for resale before going forth on this type of deal.
The above is adapted from Restaurant Franchising, a one-shot publication from QSR magazine that will appear in March 2006. For more information about RF, visit www.ownarestaurant.com or contact Greg Sanders at greg@qsrmagazine.com.
