How much is my franchise worth?
When selling a franchise, the sale price must accurately reflect the market value of the business, you can calculate this by valuing your franchise. A business valuation is conducted by a qualified business valuer with the necessary experience to estimate the value of your franchise. The franchisor may also provide valuable insight throughout this stage, such as sharing benchmark data, including the sale price of similar franchises.
How do I set a price for my franchise?
To determine an accurate sale price for your franchise, arrange a business valuation, consider advice from the franchisor and check how much similar franchises sold for to provide a point of comparison. In addition to this, consider a range of factors that can impact the value of your franchise, such as brand value, trends and growth potential.
Franchise valuation – A professional valuer will conduct a franchise valuation to estimate how much the franchise is worth. They may consider a range of valuation methods, draw upon their experience and tap into market insights to fairly and accurately value the franchise. The business valuation will provide a clear starting point for a sale price.
Franchisor advice – The franchisor may share their assessment of the value of your franchise. While this may vary from a professional business valuation, it can serve as a loose benchmark. As the value of a franchise is contingent on the brand, significant changes to the brand can impact the value of the franchise. The franchisor may be able to provide insight into how to maximise the value of the franchise.
Going price – What’s the going price for similar franchises, considering the finer details, such as the location, property, growth potential and unique features? You may turn to the franchisor for information on historic sales or the business valuer for comparable sales data.
Goodwill – Franchises are usually goodwill-rich as their success is contingent on a loyal customer base, standardised and highly efficient systems and a solid reputation. As such, goodwill contributes to the value of a franchise and can command a higher sale price.
Growth potential – Franchises are designed for growth and therefore, the business model is tried, tested and perfected, and processes are standardised so they can be easily replicated. The higher the growth potential, the higher the chances of success and the greater the appeal to buyers.
Fee structure – The fee structure must be considered when valuing a franchise, including how much the franchisor requires on a recurring basis. For example, the franchisor may require rent, royalties and/or a marketing fee.
When valuing a franchise, seek guidance from the franchisor, as their approval may be required to sell the franchise. It’s essential to conduct a professional business valuation to understand how much the franchise is worth and evidence this to potential buyers.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Expert help to value your franchise
For more information on how to sell or value your franchise, get in touch with one of our in-house business transfer agents or professional business valuers. At Selling My Business, we have a wealth of experience in selling and valuing businesses, including franchises.
