One thing you can be sure of is that it will be valued differently by the seller and the potential buyer. It will then be differently valued again by a resale broker, an accountant, an independent valuer and even the franchisor. Everyone looks at the deal from their own point of view.

In the end it will be worth what a willing purchaser and a willing vendor can agree it is worth.

Bear in mind that the franchisor will be able to veto any deal if they don’t believe the purchaser meets their normal franchisee profile; the purchaser doesn’t get through the standard recruitment and training process; or the deal is being financed in such a way that the franchised outlet in question is likely to fail.

Depending on the type of business and the sector in which it operates there may be rule-of-thumb criteria based on turnover, multiples of net profit or even the stability of the client base. In some networks there will be historic evidence of similar deals and it may be possible to use the valuation methods used for them.

The final complication is that sellers want to sell and buyers want to buy for any number of different reasons. Often the seller will sell for less than one might think reasonable if they are desperate to get out; often the buyer will buy for more than reasonable if it completes their set of outlets in a geographical region.

Brian Duckett

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