Business valuation
What it means
When an existing franchise changes hands, its price is set by a business valuation. A common method applies a multiple to the outlet's adjusted earnings (EBITDA), reflecting its profit, risk and growth, plus the value of goodwill.
Valuation is where hard data meets negotiation. The multiple depends on the system's strength, the site's track record, the lease and the remaining agreement term.
In practice
When buying a resale, base your offer on verified, normalised earnings, not the seller's headline claim. Get an independent valuation and confirm the figures against the outlet's actual accounts.
A real example
A café resale earning $120,000 adjusted EBITDA is offered at a 2.5x multiple, $300,000, which the buyer tests against three years of verified accounts and the remaining lease term before negotiating.
Business valuation, FAQs
How is a franchise resale valued?
Commonly by applying a multiple to the outlet's adjusted earnings (EBITDA), plus goodwill. The multiple reflects the system's strength, the site's track record, the lease and the remaining term.
Should I get an independent valuation?
Yes. Base any offer on verified, normalised earnings, not the seller's claim, and confirm figures against the actual accounts.
See the full franchise glossary, the Fee Index or our buyer guides.