How does buying an existing business differ from franchising?

On Behalf of | Mar 11, 2022 | Business |

Many people in the Toledo area who want to own a business do not necessarily want to start their own enterprise from the ground up. These people may be interested in either franchising or purchasing an existing business. The following is an overview of the differences between purchasing an existing business and franchising.

Purchasing an existing business

Purchasing an existing business is relatively straightforward. The buyer takes over full control of the business, making all decisions as is their right as the full owner of the business. A benefit of purchasing an existing business is that there is a pre-existing customer base, pre-existing employees and defined operating expenses. However, any vision for the future and infrastructure is the responsibility of the new owner. This can present difficulties for new business owners who are still trying to figure out how to manage their business operations.

Franchising

Through franchising, the owner of the business (the franchisor) sells the rights to an independent entrepreneur (the franchisee) to the business logo, name and model. Many common franchises are restaurants, hotels and other service-oriented businesses.

There are two main types of franchising. One is product/name franchising. In this type of franchise, the franchisor sells the franchisee the right to use the franchisor’s name and trademark. Products to be sold are manufactured or supplied by the franchisor. The second type of franchising is business format franchising. In this type of franchise, the franchisor and franchisee continue with an ongoing relationship. The franchisor helps with choosing a business site, training, supplying products and marketing.

Benefits to franchising

Franchising offers the benefit of being able to use a larger brand’s name, logo and products, as well as name recognition and marketing. However, you must comply with the franchisor’s rules regarding running your business. You will want to quantify your investment, consider your experience and lifestyle and review the existing business landscaping before deciding whether to purchase an existing business or franchising.