I recently met with a new client; they were referred to us by an existing client who likes the fact that tells them the truth even if they don’t always like what we say.
The new client was looking to buy an existing franchise and wanted someone to tell them the truth about the prospect.
The client lives near my office and the franchise location was in Libertyville, so the proximity was poor, the client would be forever driving back and forth.
I also had never heard of the franchisor, I am aware of the industry, but never heard of the franchisor.
Then we reviewed the financials, 2014 – 2016 were provided, there was no hint of the 2017 numbers. It is never a good sign in my book if you are trying to sell a company and you will not share the most recent numbers. Also there were declining sales year after year on the existing reports. This in spite of an increase in marketing and advertising dollars.
This leads me to suspect that the market is saturated. There are only so many people looking for the service and a multitude of providers.
I recommended that instead of purchasing the existing business for almost one year’s gross revenue, start the business fresh. This way they could work from home to save on rent and build the business slowly with no arbitrary location restriction based upon franchisor greed.
They like these suggestions and the business plan that we outlined for them and are going to go forward on their own.