Franchise Appraisal: What is the value of your franchise?

If you are considering selling your franchise, you may want to evaluate a franchise to determine The value of your business. In the end, your franchise is worth what anyone else is willing to pay. However, making a conscious decision before putting your franchise on the market will help you get out of the franchise system.

Factor for conducting a franchise assessment

Considered with the evaluation of a franchise that is similar and unique from the evaluation of a completely independent business. For example, when you need to determine the devaluation value of your company’s assets, in terms of a franchise, some assets will be excluded from the business valuation. Most notably, a completely independent business would own trademarks and other obscure assets (such as copyrighted material, customer lists, and other proprietary information) that could significantly increase its valuation. About the franchisee, these resources belong to the franchisor. On the other hand, in some situations, the franchise relationship itself can add value, and your franchise agreement can be an asset that adds to your overall valuation.

Some other factors involved in evaluating a franchise for the purpose of a possibility Transfer Includes:

1. Physical resources

Any physical assets owned by your franchisee will be relevant to its pricing. These range from back-office computers and furniture to point-of-sale systems and inventory. These items need to be devalued at their current price to determine how much someone will pay for them today.

2. EBIDTA

Earnings before interest, depreciation, taxes and payments, or “EBIDTA”, A rough estimate of the revenue available to a business. It is often used to determine the value of a business, but other calculations are also used. Determining the appropriate count (and appropriate multiplier) for your franchise requires a critical assessment of the specific circumstances involved.

3. Location

The location of your franchise can contribute to its evaluation in a number of different ways. For retail outlets, a key location can add significant value and provide leverage in transfer negotiations. For brick-and-mortar and mobile franchises, a preference Franchise Values ​​can also run. The position will also be relevant when comparing the prices of other businesses in the market and the prices of recently sold businesses. If you have an office or retail lease, your lease agreement can be an asset with independent value.

4. Remaining term and renewal rights

How much of your current franchise term is left? How sure is your (and your potential buyer’s) right to renew? Does the buyer have to sign the “then” franchise agreement? Will the buyer be able to start with a new initial term? These are the basic considerations for evaluating and selling a franchise.

5. Recent sales

Finally, when an assessment Suffrage, Recent sales will act as “comparable” – like a house near a residential real estate transaction. But just as no two homes are the same, no two businesses are the same. Franchisees should be careful to avoid putting too much emphasis on recent franchised and non-franchised business sales.

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