BUYING A GREENFIELD FRANCHISE

What We Do

At Greyson Legal we offer advice and help you through each step of purchasing a franchise business, whether a franchise re-sale or greenfield site.

When considering buying a franchise business, one option is to buy an existing franchise business that is already up and running, has a history of sales and current customer base. Often referred to as a franchise re-sale and which involves purchasing the franchise business from an existing franchisee in the franchise network.

The alternate option is to buy a new franchise territory or new franchise store location, referred to as a “greenfield” franchise territory or “greenfield” franchise site (or outlet). The greenfield franchise is purchased directly from the Franchisor. Franchisors often list available new franchise opportunities on their website or in other promotional material.

When acquiring a "greenfield" site as a prospective Franchisee, you need to consider additional factors that do not apply to the purchase of an existing franchise business (or re-sale). For example:

Advantages

  • you don’t inherit the flaws or faults of an existing franchise that might apply with a franchise re-sale;

  • the price you pay for the site may be lower than the purchase price to acquire an established franchised business;

  • you get the advantage of implementing the latest in design and technology (as opposed to purchasing older technology that might apply with a franchise re-sale).

Disadvantages

  • although the franchise model may be proven, the new franchise business itself will be untested within the selected territory;

  • there will be greater uncertainty about the potential performance of the new franchise;

  • the new franchise business is being built from the ground up at the selected site or territory, so will take more time to grow;

  • you will be creating new goodwill - as opposed to buying existing goodwill;

  • where the new franchised business operates from fixed premises, the franchise outlet will need to be newly fitted out - so additional costs may apply;

  • as there is no trading history there will be a degree of guesswork as to the expected volume of products and services that can be sold;

  • there will be initial uncertainty as to quantum of revenue that can be generated and profitability;

  • as a new franchise outlet you will not have existing employees - if you need new staff and they will have to be fully trained in your systems and processes;

  • you will need to expend more in marketing in the initial stages to get the franchise business name out into the market;

  • etc.

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Buying a greenfield franchise territory or outlet can present an exciting opportunity to be involved with a known brand from the ground up in the chosen location. But, the greenfield franchise is untested so there will be a degree of risk involved.

Conducting thorough due diligence and obtaining advice from a franchise lawyer is important to help you make an informed decision before committing to the purchase.

If you have any questions about buying a franchise business, whether a franchise re-sale of greenfield franchise - get in touch with Greyson Legal | Franchise Lawyers.