Buy a resale if you want a business that already has customers, staff and a track record you can examine, and you are comfortable paying for that history. Open a new unit if you want to choose the location and build the team yourself, and you can carry the business while it grows. Either way, choose the brand first, then decide between a resale and a new unit.
FranchiseHook helps people considering ownership compare options across more than 600 franchise brands through IFPG. Our consulting is 100% free to you, and the questions below apply whichever route you take.
How does a resale compare with a new unit?
| Franchise resale | New unit | |
|---|---|---|
| What you are buying | An operating business, with its customers, staff, lease and records | The right to open a new location under the brand |
| Revenue on day one | Usually some, from existing customers | Usually none until you open and build it |
| What you can verify | The location's actual sales, costs and customer history | The brand's disclosures and other owners' experience |
| Location and team | Already chosen, for better or worse | Chosen by you, with the brand's approval |
| Main risk | Inheriting problems you did not spot | A slower ramp-up than you planned for |
| Brand involvement | The franchisor usually has to approve the transfer to you | You sign directly with the franchisor |
What should you check on a resale?
A resale gives you something a new unit cannot: real numbers for the exact business you would own, which you should test with your own accountant.
- The financial records. Several years of sales and expenses for this location, reviewed with your own accountant.
- Why the owner is selling. Retirement, relocation and a new venture are different stories from a business in decline.
- The lease. Its remaining term, the rent and whether it can be assigned to you.
- The staff. Who is staying, who runs the day-to-day, and what happens if a key person leaves.
- The equipment and condition. What needs replacing soon, and whether the brand will require upgrades.
- The franchise agreement. Whether you would take over the seller's agreement or sign the brand's current one, how many years remain, and the terms for renewal and transfer.
- The brand's view. Ask the franchisor about the location's standing and what it requires to approve a new owner.
What does the franchisor have to do with a resale?
Most franchise agreements require the franchisor to approve a transfer. The brand will usually want to qualify you the same way it would qualify a new owner, and it may require training, a transfer fee or updates to the location. These terms are set out in the franchise agreement and summarized in Item 17 of the brand's Franchise Disclosure Document, which covers renewal, termination and transfer.
Ask for the brand's current Franchise Disclosure Document even when you are buying from an existing owner, because you may not receive one automatically. It shows the brand's current terms, its history and, in Item 20, how many units have opened, closed and changed hands. Compare it with the agreement you would actually take over or sign.
When does a new unit make more sense?
A new unit can be the better choice when:
- The territory you want has no resale available.
- You want to choose the site, the build-out and the team from the start.
- The brand is newer or growing quickly, so few resales exist.
- The resales you have seen are priced well above what their numbers support.
How does FranchiseHook help?
We start with you: your goals, budget, desired involvement and geography. Then we present a focused set of brands that fit, with the reasons each is on the list. You speak with the brands and existing franchisees, review each Franchise Disclosure Document, and decide with your own attorney and financial advisor.
Frequently asked questions
Is a resale less risky than a new unit?
Not automatically. A resale has a track record you can examine, and it can also come with problems. Review the records with your own accountant and attorney.
Does the franchisor have to approve me as the buyer?
Usually, yes. Most franchise agreements require the franchisor's approval for a transfer. Check the brand's terms.
Do I still get the Franchise Disclosure Document on a resale?
Not always. When an existing owner sells, the FTC Franchise Rule may not require a new disclosure document, so ask the franchisor for its current one and review it with your attorney alongside the agreement you would take over or sign.
Does FranchiseHook charge for its consulting?
No. Our franchise consulting is 100% free to anyone exploring ownership.
This article is general information, not legal or financial advice. Review any franchise agreement, FDD and resale terms with a franchise attorney and financial advisor before investing.
Exploring ownership? Start with FranchiseHook or complete the franchise questionnaire.