One of the best reasons for buying a franchise is that it allows you to build the capital value of your business so that one day you may be able to sell and retire. Most prospective franchisees look at buying greenfield sites, but the idea of buying an existing franchise, particularly in a mature network where there are very few spare territories, should not be disregarded.

The benefits to you the buyer are that you will probably be buying an existing client base, experienced staff and a good reputation. Be prepared, however, to pay a premium for that reputation. If you have got to the stage where you are interested in a re-sale, then here are some guidelines.

Due Diligence
Most franchisors will have encouraged the exiting franchisee to prepare a prospectus, which is a document that sets out all the information about the business to help you assess its worth. If this is not available then at least ask for the last two years' accounts and customer, staff and equipment lists where appropriate. Investigate all of these thoroughly.

Purchase Price
Take advice from a good accountant on the above information. Do a business plan and work out whether the asking price is too high. Be prepared to haggle - the seller may be prepared to negotiate. Remember that the franchisor is in a difficult position - they may be keen to have new blood in the network, but at the same time they will not want to upset the selling franchisee by telling you that the business is overpriced.

Finance
Make sure your finance is in place. Also consider whether the purchase will be an asset purchase or, in the case of a limited company franchisee, a share purchase. This can often be problematic - there may be tax advantages for the seller in transferring the shares in their existing company to you, but it may be more advantageous to you to buy the assets rather than the shares since, amongst other reasons, you would be free of any 'skeletons in the cupboard'.

Franchise Agreement
Practically all franchisors will not permit the sale to even start until you have signed a franchise agreement. Get it reported on by an experienced franchise solicitor, even though your predecessors may already have signed the same agreement. Experience shows you are likely to get a bigger bill if you take the agreement to a solicitor who has little experience in franchising.

Sale Agreement
Do NOT try and save money by buying the business without a proper, written sale agreement. It is a document which, among other things, should give you some comeback against the seller if the equipment you have purchased is faulty; if you based the purchase price on information (e.g. accounts) which with hindsight was misleading; and clarifies exactly what you are getting for your money. It operates in a very similar way to buying a house, and very often similar amounts of money are at stake. Most mature franchisors will want to control this sale process and will have a sale agreement that they insist on both you and the exiting franchisee using. Use it - it can save you time, money and arguments!

Costs
With simple franchise purchases you may feel able to proceed without solicitors (which is an odd thing for a solicitor to write) but where real property (e.g. the lease of a shop) is involved then almost certainly you should instruct solicitors. Where the franchisor is running the sales process they will usually expect the buyer and seller to pick up the franchisor's fees - but in return your own legal fees can often be kept very low.

The above of course is just a snap shot. Although most mature franchisors will have a set sales process similar to the above, clearly the details will vary depending on, for example, whether you are buying a simple van-based franchise, or a coffee shop or restaurant franchise that involves a property element and the transfer of employees. It is becoming increasingly common for franchisors to allow brokers to play a role in the re-sale process. Brokers who have a strong background in franchising, usually because they are ex-franchisor management, can play a particularly useful and cost effective role. So don't be suspicious if you find yourself dealing with a franchisor and a broker. Happy shopping!