What should I check before buying a flooring franchise resale?

Buying a flooring store from a franchisee is different from signing up with the banner as a new franchisee. You take over a running showroom, its stock, its customers and the franchisee’s place in the system. The franchisor usually has a say in who takes that place. Start by asking what the franchisor will want from you, then test the store itself.

Showroom stock and samples

Ask for a list of the stock on hand, the display boards and the sample sets, with their dates. Sample sets go out of date when the banner changes its lines. Stock that is discontinued is hard to move. Ask who paid for the displays, and whether the franchisor requires you to refresh them after the sale. Walk the warehouse yourself, or send someone who knows the product.

Supplier and rebate terms

Many stores buy through the banner’s supply program, and the rebates can be a large part of the store’s result. Ask whether those rebates belong to the store or the franchisee personally, whether they carry over to a new owner, and what the supplier can change. Read the supply terms, not only the seller’s summary of them.

Contractor and builder accounts

Installers, builders and property managers may bring steady work. Ask which accounts are in writing, which rest on the seller’s handshake, and which could leave when the owner does. Speak to a few of them if the seller agrees. Also ask about open warranty and callback work, since it follows the store. For a broader look at those inherited items, see what off-balance-sheet commitments a buyer inherits.

Franchisor approval and remaining term

Ask the franchisor in writing what its approval of a buyer involves, how long it takes, what fees or training it requires, and how much time remains on the franchise agreement and whether it can be renewed. Your lawyer should read the agreement and any disclosure documents before you commit. Ask your lawyer how a condition that depends on approval should be handled in your offer.