Before purchasing any existing business, you should ask to see the business’s tax returns. Ask yourself, why is the owner selling the business and how long has he/she owned the business. Some other good questions to ask are:

• What does the owner plan to do after selling the franchise?
  
• Was or is the franchise branch bankrupt?
  
• Have any lawsuits been filed against the particular franchise branch?
  
• What outstanding building leases does the franchise have?
  
  

Finances

It is impossible to perform a thorough investigation of a potential investment, such as purchasing an existing self storage franchise branch, without examining the franchise’s financials. Ask to see the following financial documents of the company for the past 3 years:

• Income Statement
  
• Balance Sheet
  
• Cash Flow Statement
  
• Sensitivity Analysis
  
• Breakeven Analysis
  
• Financial Ratios
• Tax Returns
  

It is helpful to have a person trained in analysis to look these documents over with you. Their trained eye can spot any red flags that might warrant some consideration as far as too much debt or assets being tied up in accounts receivable and so forth.

Negotiate the Acquisition of the Existing Franchise

There are a number of avenues to pursue in financing your franchise. Financing options are explained in detail on Financing Your Franchise. The deal’s structure is contingent upon the seller’s ability to negotiate and your personal financial disposition. Generally, the seller will finance 25-33% of their business’s sales price of their business, which is called seller financing.

After performing these steps you will have a general consensus on the purchase price. You should then have your attorney draw up a letter of intent. The letter specifically states that the seller can’t sell the business to anyone else, while you two are working on closing the deal.