Franchise Resales
Franchise Resales
When existing businesses sell, the price is typically based on a multiple of normalized annual earnings or cash flow. Another common term used in the financial industry is EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
Typically, franchisees want to re-coup every dollar they put into the business and then some. Often this is possible assuming the business is profitable and has a track record. Two positives franchisees sometimes overlook:
1. Franchised businesses that are profitable will typically bring a higher multiple of cash
flow in the sales price
2. There is intangible value (because it’s a franchise) that can add to the sales price.
But on the flip side, an existing franchised business (in the eyes of the buyer who is looking to buy a stream of income) is an existing business that happens to be a franchise. Therefore, unless the business is profitable, this buyer will probably not wish to pursue it.
The franchise minded buyer (wants less risk and likes the franchise model) will like the fact that the current franchisee has done most of the hardest work in ramping up the business. The existing franchised business will be very appealing to this buyer assuming he/she has a personality that matches the business model.
So what happens if the business is not yet profitable or is just now at break-even? The franchisee will have to decide how motivated he/she is to sell those assets. Obviously, since there’s no stream of income, the price will need to attract the franchise minded buyer. Will this buyer pay you a price higher than what it would cost to put in a new franchise? Possibly, however several factors enter into the buyer’s decision:
1. Is this franchise territory more desirable than an available new territory?
2. How ramped up is this business? How large a database?
3. How much marketing has been done to create branding in the territory?
In the event the current franchisee has a “short fuse” on when they wish to sell – price may have to be lower than turnkey cost of a new franchise in that system.
The franchise industry is exploding with growth. Now is a great time to buy a new or existing franchise.
The next question is: Which one is right for you?
Franchise Resales - To learn more about this author, visit Anne Barr's Website.
Like this article? Share it with your friends
What happens when an existing franchisee decides to sell? Franchisees don’t actually “own” the franchised business. In fact, they own the “assets” of the business only. The Franchisor gave them the “rights” to use the name, marks, the operating manuals, the “system”, however the franchisee does not “own” these items. In effect, they rent them from the franchisor during the term of the franchise agreement.
When existing businesses sell, the price is typically based on a multiple of normalized annual earnings or cash flow. Another common term used in the financial industry is EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
Typically, franchisees want to re-coup every dollar they put into the business and then some. Often this is possible assuming the business is profitable and has a track record. Two positives franchisees sometimes overlook:
1. Franchised businesses that are profitable will typically bring a higher multiple of cash
flow in the sales price
2. There is intangible value (because it’s a franchise) that can add to the sales price.
But on the flip side, an existing franchised business (in the eyes of the buyer who is looking to buy a stream of income) is an existing business that happens to be a franchise. Therefore, unless the business is profitable, this buyer will probably not wish to pursue it.
The franchise minded buyer (wants less risk and likes the franchise model) will like the fact that the current franchisee has done most of the hardest work in ramping up the business. The existing franchised business will be very appealing to this buyer assuming he/she has a personality that matches the business model.
So what happens if the business is not yet profitable or is just now at break-even? The franchisee will have to decide how motivated he/she is to sell those assets. Obviously, since there’s no stream of income, the price will need to attract the franchise minded buyer. Will this buyer pay you a price higher than what it would cost to put in a new franchise? Possibly, however several factors enter into the buyer’s decision:
1. Is this franchise territory more desirable than an available new territory?
2. How ramped up is this business? How large a database?
3. How much marketing has been done to create branding in the territory?
In the event the current franchisee has a “short fuse” on when they wish to sell – price may have to be lower than turnkey cost of a new franchise in that system.
The franchise industry is exploding with growth. Now is a great time to buy a new or existing franchise.
The next question is: Which one is right for you?
Franchise Resales - To learn more about this author, visit Anne Barr's Website.
Like this article? Share it with your friends
| |||
 |
No article feedback found. | ||
|
Leave Your Feedback | ||
|
|||
 Franchises appealing more to mature recruits
| |||
| Age profile of new franchisees increases. |
|||
|
The franchise resale option
| |||
| When a franchisee decides to sell his business. |
|||
|
Franchising with all its Success
| |||
| This article shows point on why franchising is a better business venture. |
|||
|
About 60% of all franchise opportunities have less than 50 units.
| |||
| There are over 2500 franchise opportunities operating in the U.S., some of these franchise opportunities are larger systems but most of them are smaller emerging systems.
About 60% of all franchise opportunities... |
|||
|
Did you know: NIIT Franchise was present in Malaysia in 1997?
| |||
| NIIT Kuala Lumpur Franchise was established in 1997 as one the first NIIT franchise in Malaysia, originally located at Menara TA opposite KLCC Petronas Twin Towers. NIIT KL has successfully produced hundreds of stud... |
|||
| |||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
 Anne Barr (Visit Anne's Website) Anne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.co m for more information about me and my company.
|  |
 |
|
|
 |
|
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
 |
 | ||
 |
||
 |
||
 |
||
|
| ||
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 |
 Challenges Of Change Winning Sales Letter Make Money Online The Flowing Point Business Coaching |
|
 | ||
 |
Top 50 HR Blogs 2009
Top 50 HR Blogs 2009 | |
 |
The Top 10 Guy Kawasaki Posts
Best Posts for Entrepreneurs | |
| ||
 |
|
|
|
|
|||||||||||||||||||||
 |
|
|
||||||||||
