Buying a Restaurant Franchise versus an Independent

Posted by Robin Gagnon on Feb 13, 2012 5:03:00 PM

Franchise Restaurant for saleBuying a restaurant franchise creates different requirements for the buyer than the purchase of an independent restaurant.   For the new restaurant buyer who is dealing with all the elements of closing, buying a restaurant franchise can add another level of complexity to the purchase process.  Here’s what a buyer can expect when buying a restaurant franchise versus buying an independent restaurant.  

Franchise Pre-Qualification

Buying a restaurant franchise means you will almost always be required to pre-qualify financially and meet the franchise net worth obligations.   An independent restaurant owner will not have any conditions for your financial position.  That makes a difference for the restaurant buyer that has cash on hand to buy and good credit but a less than stellar balance sheet.   When purchasing for cash, the independent restaurant owner has no interest beyond the amount of cash you have on hand to pay him. 

Franchise Interview and Assessment

The franchisor will want to meet and interview the franchisee before approval.  This can take place over the phone, via Skype or in person.  Some franchises require an online personality profile.  All will require a lengthy application including references and experience.  Prepare your resume in advance and you will be ready when it’s time to get the transfer approved.   

Franchise Training

Training is always a requirement when buying a restaurant franchise no matter how long the restaurant previously operated or the amount of training the current owner will provide.  Every franchise wants to make sure you know how to do things their way.  Some concepts require you to attend training before you close.  Others will not allow you to train until after you close.  Depending on the franchise you are buying, the training can last from one week to six weeks and take place in your new store, a corporate training store or a combination of both.  Prepare to spend some time out of town when you buy a franchise, something you won’t encounter when buying an independent restaurant.

Franchise Training and Transfer Fee

Buying a restaurant franchise means additional costs versus buying an independent restaurant.  Expect to see a franchise transfer fee in addition to the purchase price.  This amount, set forth in the franchise disclosure document, is used to offset the cost of training the new restaurant owner.  Though the buyer typically benefits from the training, it is not set in stone that he should cover all the costs.  The buyer is within his rights to negotiate for the buyer to pay a portion or the entire fee.

Buying a restaurant franchise means you’re buying into the systems, processes and requirements of a company.  Anticipate these requirements early in the process and you won’t encounter any surprises on your way to restaurant franchise ownership.  

Topics: Buying a Restaurant

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