Before selling or buying a franchise, it is essential to perform a business valuation.
As things finally begin to return to a feeling of normalcy after the last few years, it can be staggering to realize how much has changed in the business world. The pandemic showed us just how much “the old way” of doing business left to be desired, especially for many people who had the opportunity to experience being their own boss when they worked from home. But it also showed us just how fragile a small business can be – so many of our favorites did not survive the times. The intersection of the freedom of being your own boss and the security of an established company is the land of the franchised business. Read on to learn more about the different aspects of franchise business valuation that you need to know before trying to sell your franchise (or buy one) with a business broker.
Inherent Value Of A Franchise
Some qualities of the franchising business model give these businesses inherent value that a traditional small business wouldn’t otherwise have. These include the ability of a small franchisee to leverage the national reputation of the brand. This is not something that should be undervalued – brand recognition is important in determining where people spend their money.
Value Of Prescribed Policies
The business model of a franchise also dictates much of how the business will be run, meaning that the nuts and bolts of the hiring, training, marketing, and product decisions are not yours to decide. This frees up considerable time to run your business and recoup the cost of buying it more quickly than in a business from scratch.
Value Of Greater Purchasing Power
Another aspect of having a national brand behind you is that you may find that you can pay lower prices for products and goods because of the purchasing power of the brand. Your individual location might not buy enough of a product yearly to get a discounted rate on it, but nationally, your franchising company does, and you benefit.
Additional Impacts On Value
If you’re selling your franchise or looking to buy an existing franchised location, there will be other determinants of the value. These are factors that would impact the valuation of any business sale, not just franchises, including the location, the yearly profits it has made so far, and the valuation of the depreciable assets.
Buy With Atlantic Business Brokerage, Inc.
At Atlantic Business Brokerage, our mission is quite simple; we help sellers sell businesses, and buyers buy businesses! Over the past 30 years, ABBI has facilitated the sale of countless commercial properties, businesses, and franchised locations. With our unparalleled knowledge of the business purchase and sale industry and our network of contacts, we offer services to both buyers and sellers that no other brokerage firm can match. Contact us to discuss your business buying and selling goals today at 410-561-9800 or Toll-Free at 800-279-7569. Email us at