Buying a Franchise - Step five

Step five of our series on buying a franchise is looking at whether an established franchise location or a new franchise location is best for you.

If you’re happy with what the existing franchisees have told you, then you might have a decision to make as to whether you choose to buy an existing store or start a new store in a ‘Greenfield’ location.

Let’s assume for a moment that you’re the type of person who can tolerate a reasonable level of risk and as such, you’re prepared to venture into a new ‘Greenfield’ franchise where the franchisor has not operated from a location in the area or within the territory. What should you look for, what are the questions to ask and how do you arrive at a commercially sound decision?

Some of the benefits of taking on a new ‘Greenfield’ franchise include:

  • No goodwill is payable to a previous franchisee
  • It is a brand new operation and the local reputation of the business can be established as desired
  • If it is a site based franchise, the landlord may be prepared to make a contribution toward fit out and/or negotiate the lease terms to link rental to sales levels.

Obviously, the balancing factor is that you will not have the certainty of a proven trading history for that particular location.

As an alternative to a ‘Greenfield’ franchise, an established business enables you to take some comfort in the proven trading history so, in effect, it is generally perceived as a lower risk option.

However, you may have to deal with the history of the previous franchisee. If the premises or vehicles are looking a little tired, a refurbishment or upgrade can restore the appearance. Don’t forget the current franchisee’s reputation in the market – which could be good or bad. Similarly, existing employees could be a positive or a negative influence.

A key issue to consider is the potential for further growth of the business; is there more growth to be had or has it reached its peak?

There is no substitute in business for having detailed and accurate historical financial information for the performance of a business. The quality of the numbers is crucial and frankly, some examples defy belief – they lack detail and in some cases, any semblance of accuracy.

Thus you need to look carefully when considering between a ‘Greenfield’ and an existing location. Once you've looked into this, you should be looking at the next steps in the buying a franchise process.


DC Strategy has over three decades of experience and is looking to the future as we take businesses and grow their enterprise value through franchising. In our newsroom you can find news on franchising, marketing, recruitment and business information, legal advice for businesses and information about franchise opportunities.


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