Episode 30: What is the Best Path to Business Ownership for You?

Pam Currie 
What is the best path to business ownership for you?

Shari Currie Skjoldager 
Great question, Pam. Welcome back to Franchise Sisters, Franchise Business Radio, where we help you gain insider knowledge, avoid costly mistakes, and make informed decisions before investing in a franchise business. I’m Sheri Curry-Skolldegger.

Pam Currie 
Pancuri, circling back to the question, what is the best path to business ownership for you? This leads us to additional questions such as, should you buy an existing business for sale, franchise or non-franchise? By the way, we refer to those as resales, and this is a key topic for our episode today. Another question is, should you invest in a franchise new unit?

Or should you start your own business from scratch? This is a highly entrepreneurial path. Here is the truth. You have options when it comes to business ownership. Sort of. So let’s discuss.

Shari Currie Skjoldager 
All right, Pam, let’s first discuss buying an existing business, also known as a resale. Resales usually fall in one of three categories. The first category is thriving. A thriving resale has the value proposition of cash flowing, an established customer base, a team in place, and hopefully is a turnkey business. You do have to pay a premium typically to step into a thriving business.

because you are paying for that cash flow and the previous owner’s hard work and goodwill. A thriving resale could be a great opportunity if it aligns for you. Now in full transparency, finding a thriving resale that aligns with you may be like finding a needle in a haystack.

Pam Currie 
Yes, yeah. One of the reasons why it may be looking for a needle in a haystack is that as a buyer, you are in a competitive environment. The difficulty for an individual looking to buy an existing business are the merger and acquisition, business groups that are out there, the private equity companies who are financially strong and getting first dibs in outbidding other buyers.

Another competitive consideration is if you are looking at an existing business for sale and it is a franchise resale. If so, sometimes you might run into a difficult situation there because you again are an outside buyer. To get first dibs on the opportunity, it helps to be in the franchise system, to be a franchisee that has the inside track and

be that franchisee who’s looking to expand and grow their portfolio by acquiring franchise unit resales. Since a franchisee is already part of the franchise system, they have advantages as a potential buyer for obvious reasons. They are able to have the inside track when franchisees are looking to exit the system. So that can create another competitive environment for an outside buyer.

Let’s talk about the good news. If you are a franchisee, you’re already in the franchise system and your vision is to scale, then you’re in a strong position to grow your mini empire by acquiring franchise units before they even hit the market. It is a great scalability strategy for a franchisee empire builder. But you have to become part of the franchise system first. It usually makes it easier.

Shari Currie Skjoldager 
A lot easier. All right, let’s move on to the second resale category. It’s what we call marginal resales. This type of resale may not be profitable or even cash flowing in. However, you may be able to step in as a new owner and take advantage of a lower buying price and have some basic infrastructure and assets in place for a quicker launch. This type of resale is more like a launching pad to get jump started.

in the business. All right, and the third resale category is a distressed resale. In this situation, you may be able to get a very low purchasing price. We sometimes call it a fire sale and turn the business around. And it may be somewhat similar to opening up a new franchise unit.

Pam Currie 
Yeah, yeah. A couple more thoughts on resales. Buying an existing business isn’t always the smartest move. On the surface, it sounds like a turnkey situation with instant cash flow, loyal customers, and a team already in place. Reality. Often the books look better on paper. It is not uncommon for employees to leave when ownership changes.

and that instant cash flow that you paid a premium price for has some vulnerability because there’s a good chance revenue will drop due to ownership changes. Always remember that the seller knows more than the buyer and the buyer inherits the good and the ugly. Of course, if the resale opportunity aligns with you as a future business owner,

It passes your qualifying factors and the vetting process. It meets your financial capability, your timeline. Wow, then this resale may be the needle in the haystack you’ve been looking for. Shazam.

Shari Currie Skjoldager 
Sheva Sam is right. Okay, another point to make when buying a business is understanding the numbers. For a resale, you typically will sign an NDA so you can review the seller’s P &Ls. This is obviously welcome data. However, it is sometimes difficult to understand another business owner’s financial book management. Now, admittedly, we think that one of the many advantages of a franchise resale

versus independent business resale is that you typically have greater transparency in the numbers. Reason for this is you generally, generally have more access to data points when it comes to the numbers because franchisees report revenue to the franchisors. Plus you have additional data resources such as the franchise disclosure document.

And another great source are other franchise owners who can validate financial performance within the franchise system. Another thing that’s also important to remember is that the buying process of a resale versus starting a new franchise is very different.

Pam Currie 
Yeah, Sherry, and we would be remiss if we didn’t share that as franchise consultants, we represent franchise resales and franchise new unit development, meaning opening up a new franchise location. We see the opportunity in both depending on your goals and your timeline. This is our recommendation. Don’t put a fence around yourself.

open up your options and look at franchise resales as well as franchise new unit development. Great news is that by using our consulting services, we will be able to uncover new development franchise opportunities and franchise resales that are published and franchise resales that are not published. When we reach out to franchisors on our client’s behalf,

We sometimes get exposed to franchise resales that are not published. And we can get you introduced to them so you can learn more.

Shari Currie Skjoldager 
And Pam, we mentioned that the buying process of a franchise resale versus a franchise new unit is very different. And that finding a franchise resale that passes qualifying factors can sometimes be difficult. And let’s face it, if it’s published and it’s a thriving resale, then you are definitely going to be in a very competitive buying environment.

So let’s discuss some key qualifying factors to help anyone who’s considering a resale.

Qualifying factor number one when you’re considering a resale. You as the owner, does this business model align with your operational strengths as a business owner? Also, does everything that you are inheriting with this business align with you, such as the culture, the team, the compensation structure, the customer reviews, so on and so forth?

In addition, do you align with the team, which can sometimes consist of family and friends? And don’t forget, does this business integrate well with the time that you can give to it? It is not uncommon for new owners to underestimate the time that is still required to learn and run the business, even though it is up and running.

Pam Currie 
Absolutely. Qualifying factor number two, your investment capability. Here’s some food for thought. Valuation of a resale can sometimes be tricky. Is the asking price for the resale appropriate? Sometimes the seller puts a higher valuation on their business than what

a lender would and this can create funding challenges. Another two part question on your investment capability is one, are you in a financial position to pay a two to four times multiplier for that cash flow? Money does not come for free. Secondly, are you okay with taking a potential revenue dip after paying a

premium price, which often occurs because ownership transition can create a revenue dip. And finally, if your funding strategy is seller financing, then you really are looking for a needle in the haystack. Most sellers do not like the funding strategy to be seller financing when it’s an outside buyer.

Shari Currie Skjoldager 
All right, qualifying factor number three, your preferred market, opportunity or territory. Is this existing business in a desirable location? In other words, can you get to it easily? Do the current and future demographics align with your business growth vision? Also, if there’s a storefront involved, what are the landlord leasing the terms?

Is their equipment and asset included in the resale? If so, how much have they been depreciated? And remember, always the seller knows more than the buyer.

Pam Currie 
Can’t say that enough. Qualifying factor number four for resale, your buy box, your desired business model criteria. Does the resale check 70 to 80 % of the criteria you are looking for in a business, such as type of employees, customer acquisition preferences, business environment, meaning retail, mobile, home-based?

Sherry, I’m going to do little unsolicited plug here. If you would like coaching on identifying your buy box criteria, that is what we do. This is part of our franchise consulting services when assisting anyone who is considering franchise selection and investing in a business.

Shari Currie Skjoldager 
Love that plug Pam, thanks. Alright, finally qualifying factor number five, your timeline and vision. Take into account your situation. Do you have time to wait to find the resale that aligns with your key factors? In other words, weigh your time to money. Also scalability, is your vision to scale through future acquisition? And is this more easily done within a franchise system?

or as an independent entrepreneur.

Pam Currie 
great questions. We hope this qualifying factor exercise gets you thinking about how different and sometimes difficult the buying process can be for a resale, especially when you’re trying to achieve a purchase in a timely manner. What we see with clients is they are so hyper-focused on finding an existing business for sale that time keeps tick-tocking by. And time is money.

They invest months and months, sometimes years, when admittedly it is sometimes easier, faster, less complicated, and less money to step into a new franchise unit and create your own goodwill as a business owner. Our recommendation? Open up your options and consider new franchise unit development along with franchise resales.

Shari Currie Skjoldager
Hey Pam, I’ve got a great real world story to share that really enforces this. Recently, I had the opportunity to work with a strong business person and he was interested in moving to Texas as soon as possible. He had an attorney in place and a local business broker looking for qualified resales, but his timeline was starting to get really stretched out. When we spoke, I knew it would be very difficult.

to find a resale in his desired timeline. So I suggested he continue to work with his business broker for resales and I would invest in new franchise development research. I knew I could find something that met his business goals and would allow him to launch quickly. Needless to say, we found something within a week. He took the time to do his full due diligence and he was actually a franchise owner in Texas in about four weeks. Now that’s success.

Pam Currie 
Well, that is success. Now, we are the first ones to say that franchising is not for everyone. Some of us are more entrepreneurial in nature. A pure entrepreneur identifies an opportunity, takes initiative, and assumes the risk to operate and grow the business. A franchisee has an entrepreneurial spirit, and we call it being a fran-trepreneur. It’s a blend of an entrepreneur and a franchisee.

And a franchise system has a spectrum of franchisors. Some are single unit owners, some are multi-unit owners or area representatives or master owners. These franchisee ownership models are a topic for a totally different podcast episode.

Shari Currie Skjoldager 
That’s right, Pam. And buying a franchise is classified as a risk mitigation approach to business ownership. So this is what we’re going to do. Let’s highlight the advantages for considering franchise and why so many aspiring entrepreneurs choose franchising as their path to business ownership.

First advantage for considering a franchise, proven business model. You get the playbook. Franchise ownership allows you to step into a business built on tested systems, refined processes, and real world results. Instead of navigating costly trial and error on your own, you leverage a model that has already worked, reducing time, risk, and unnecessary mistakes. Advantage number two.

comprehensive training and ongoing support. You’re in business for yourself, but you are not by yourself. From initial onboarding and operational training to marketing guidance and ongoing field support, franchisors provide structure, systems, and coaching designed to help you execute effectively and grow confidently. Advantage number three, brand recognition and cooperative marketing.

power. Established brand equity builds trust faster and accelerates your customer acquisition. Also beyond the brand recognition, many franchise systems now offer national sales accounts program, securing and servicing large corporate clients on behalf of franchisees. An independent business owner is often limited to local reach. Franchise systems on the other hand,

can support national corporations like Starbucks and Amazon because they operate with a unified system and nationwide coverage. So that’s real power in scale. All right, finish number four, greater cost predictability. Franchise systems provide clearer visibility and startup investment, operating expenses and performance benchmarks, while every business has variables.

Shari Currie Skjoldager 
franchising significantly reduces the unknown compared to starting from scratch. And advantage number five, group purchasing power and economies of scale. Franchisees benefit from negotiated vendor relationships and bulk pricing on equipment, vehicles, technology, food, inventory, and more. We all know lower costs equal stronger margins.

Pam Currie 
Advantage number six of a franchise, built in peer network. One of the most undervalued advantages, fellow franchise owners. Being part of a system means access to peer collaboration, shared best practices, and real world insight from operators who have already navigated similar challenges. That exchange of experience is invaluable.

Advantage number seven, staying relevant in a changing market. Strong franchise systems innovate. They test new products. They refine services. They adapt to market shifts. Think AI. They pilot ideas at a system level, minimizing financial risk to individual owners. In addition to that, as environments evolve,

franchisees benefit from collective agility. Advantage number eight, financing and site selection support. Because franchise systems have historical performance data and structured models, lenders and landlords often view them as lower risk compared to independent startups.

Many franchisors provide assistance with real estate guidelines, lease negotiation support, as well as site selection guidance, critical factors in long-term success. Advantage number nine, scalability and business portfolio growth. Franchising offers a clear pathway to expansion.

Franchise owners can acquire franchisee unit resales. Franchise owners can develop multi-unit territories. Franchise owners can diversify with complimentary franchise brands. You’re not just buying a franchise, you’re entering a scalable growth platform. And here we go, advantage number 10.

Pam Currie 
to owning a franchise. Stronger resale value and exit strategy. When it comes time to transition, franchisees benefit from a built-in buyer pool and they have a compelling value proposition to sell their business. They have the proven methods of operation. They have co-op marketing power and brand awareness.

They have built-in training and onboarding, support, economies of scale, peer network, back office infrastructure, path to scale and grow your business portfolio as a franchise owner. Knowledge doesn’t leave when the seller sells. Buyers are acquiring more than a standalone franchise. They’re acquiring a supported system. So I guess the bottom line is this.

Franchising isn’t about eliminating risk. It’s about reducing uncertainty and increasing certainty. For many aspiring entrepreneurs, a franchise offers structure, support, scalability, and a community. These are powerful advantages on the journey to business ownership.

Shari Currie Skjoldager 
Great stuff, Pam. And everybody, that’s a wrap up of our top 10 advantages for becoming a franchisee. If you want to learn more about pursuing franchise ownership, then go to our podcast website, franchisesisters.com. We’ll take you there. Be sure to follow, subscribe, and share this episode with someone considering their next move.

Pam Currie 
we encourage you to take the first step. Contact us to schedule a free franchise discovery call. We welcome providing you with free personalized coaching, insight on the franchise community, and practical due diligence tools to equip you to investigate before you invest. Our services are no charge and no cost difference to you. We are compensated by the franchisor

when a successful business match is made. This is the Franchise Sisters. Fist bump.

Shari Currie Skjoldager
signing off.