Can acquiring a business grow your franchise? | Be The Boss

Can acquiring a business grow your franchise?

When seeking to grow your franchise, there are usually two options available to you:

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1. Accept a prospective franchisee who will secure a new property from which to operate,
2. Acquire an existing business and recruit its owner or a new prospective franchisee to operate it

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There are benefits and challenges to each strategy. Allowing your new franchisee to select and set up a new site has the advantage of immediately showcasing your brand to that area, but it can be a very costly and time-consuming affair.

Conversely, acquiring an existing business and transforming it into a branch of your franchise is usually much quicker, but its customers may take time to recognize the new ownership and accept a franchise business at a location that used to be privately owned.

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How to decide which approach is best for your franchise

You must perform due diligence before pursuing either strategy, assessing your business's finances and those of your prospective franchisee. You must consider the risks and benefits of both options and discuss them at length with trusted advisors to maximize the likelihood of success.

Consider factors such as your existing operational expenses, local market dynamics, the experience of the proposed franchisee, regulations for obtaining building permits and operating licenses from the local authorities, and your marketing strategy to build brand recognition at the target locale.

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Considerations for acquiring an existing business

By taking over an existing business, you acquire not only an operational infrastructure but potentially also its owner and workforce, minimizing your costs and accelerating timescales.

Before accepting all of the existing workforce, however, it is important to confirm whether their vision and values align with those of your business. You may wish to establish clear core values and implement specific processes and principles that will guide how they do business once they are under your brand's name. This will help them recognize the new ownership and ensure consistency with your other branches.

Consider whether the business's existing customer demographics align with your brand's target audience as overlap in this area will significantly enhance the likelihood of success. Perform strict market research to establish whether the opportunity promises to enhance your brand.

You should consider why the business is available for acquisition as you will want to limit the issues and liabilities that you will inherit. Consider not only the financial liabilities but also potential cultural challenges, legal liabilities and existing operational practices. In short, any part of the operation that may present conflict during integration should be carefully assessed to determine whether issues can be mitigated or eliminated. Underestimating these issues could cost time and money, affect the brand's association with the workforce, and threaten your market position with the new location.

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By carefully evaluating all aspects of the proposed acquisition, you will be able to make informed decisions that will promote sustainable growth and contribute to successful outcomes.