Franchise Resale Multiples: What's Your Business Actually Worth?

At some point, you will sell your franchise. Maybe in five years to fund retirement. Maybe in ten years to a private equity firm. Maybe next year because life circumstances changed. When that day comes, you will discover that "what it is worth" depends entirely on who is buying and what you have built.

The franchise industry throws around valuation multiples like they are universal truths. "Franchises sell for 2-3x earnings." "Our brand commands a 4x multiple." These statements are meaningless without context. A distressed single unit with an absentee owner sells for a very different multiple than a professionally managed ten-unit portfolio with growth rights.

Understanding how buyers actually value franchise businesses lets you build for maximum exit value — and avoid the painful surprise of discovering your "asset" is worth less than you invested.

The Valuation Basics

Franchise resales are typically valued as a multiple of Seller's Discretionary Earnings (SDE) for smaller deals or EBITDA for larger portfolios.

SDE (Seller's Discretionary Earnings): Net profit plus owner's salary plus owner benefits plus non-recurring expenses. This represents the total cash flow available to a single owner-operator. Used for businesses under $1M in value.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Operating profit before financing and accounting adjustments. Used for larger businesses where a professional manager (not the owner) runs operations.

The distinction matters. SDE assumes the buyer will work in the business. EBITDA assumes they will not. A business with $150,000 in SDE might only show $80,000 in EBITDA after deducting a market-rate manager salary. Same business, very different valuation basis.

The Multiple Ranges

Franchise resale multiples vary widely based on brand, scale, geography, and business quality. Here are realistic ranges:

Notice the pattern: scale commands premiums. A single unit generating $100,000 in SDE might sell for $200,000 (2x). Ten units generating $1,000,000 in combined EBITDA might sell for $5,000,000 (5x). The ten-unit portfolio is not just 10x larger — it is 25x more valuable because of the multiple expansion.

The Seven Factors That Move Your Multiple

Within any range, your specific multiple depends on factors you can influence:

1. Brand Strength

Some brands command premiums. National recognition, strong unit economics, and robust franchisor support all translate to buyer confidence. A Chick-fil-A (if you could buy one) trades at a different multiple than a regional sub shop.

You cannot change your brand after signing, but you can choose wisely upfront. Research resale activity in your system. Are units selling quickly at strong multiples, or sitting on the market for years?

2. Earnings Quality

Not all earnings are equal. Buyers pay more for:

• Consistent earnings — Stable year-over-year performance beats volatile swings
• Growing earnings — Upward trends justify higher multiples than flat or declining
• Diversified earnings — Revenue from multiple dayparts, customer segments, or channels is less risky
• Clean earnings — Minimal add-backs, clear accounting, verifiable numbers

A business showing $150,000 in SDE with 20% year-over-year growth will sell for a higher multiple than one showing $150,000 with flat or declining trends. Buyers pay for trajectory.

3. Owner Dependency

How much does the business rely on you? This is the single largest determinant of multiple for small franchises.

If you work 50 hours a week and the business would collapse without you, buyers are not purchasing a business — they are purchasing a job. The multiple reflects that. They will pay less because they are valuing the opportunity to work, not the opportunity to own.

If you have a GM running operations and you spend 5 hours a week on oversight, buyers are purchasing a cash-flowing asset. They will pay a premium because ownership does not require their labor.

4. Lease Terms

Your lease is an asset or a liability. Buyers evaluate:

Remaining term: A lease with 2 years remaining creates uncertainty. What if the landlord does not renew? What if rent doubles? Buyers discount for short remaining terms. 7+ years remaining is ideal.

Rent as percentage of revenue: Occupancy costs (rent + CAM + taxes) should be 8-12% of revenue for most concepts. Above 15% signals an unfavorable lease that compresses margins permanently.

Assignment rights: Can the lease be transferred to a buyer? Some leases require landlord approval or allow the landlord to recapture the space. Restrictive assignment provisions kill deals.

5. Franchise Agreement Terms

The buyer inherits your franchise agreement. Key terms that affect value:

Remaining term: Same logic as leases. A franchise agreement with 3 years left forces renewal negotiation (and potential remodel requirements) soon after purchase.

Transfer fees: Most franchisors charge 25-50% of the current franchise fee upon transfer. This comes out of your proceeds. A $50,000 franchise fee means $12,500-$25,000 in transfer costs.

Development rights: If your agreement includes rights to open additional units, those rights have value — especially to buyers looking to grow. Undeveloped territory rights can add 5-15% to your valuation.

6. Facility Condition

Buyers walk your location. What they see affects what they pay.

Deferred maintenance — worn flooring, aging equipment, dated decor — signals future capital expenditure. Buyers will mentally deduct the cost of bringing the location to standard. If they estimate $50,000 in needed upgrades, that comes off the purchase price.

Conversely, a recently remodeled location with modern equipment commands a premium. The buyer knows they will not face a capital call in Year 1.

7. Reason for Sale

Buyers are suspicious. Why are you selling? The narrative matters.

Positive narratives: Retirement after a successful run. Relocating for family reasons. Partnership dissolution where both parties are amicable. Selling to fund a larger investment. These stories do not raise red flags.

Negative narratives: Burnout. Financial distress. Conflict with the franchisor. Health issues that suggest the business was neglected. These stories trigger buyer skepticism and justify lower offers.

You cannot always control why you sell, but you can control how you frame it. Work with your broker to develop a narrative that reassures buyers.

The Math in Practice

Let's value two hypothetical single-unit franchises in the same system:

Same earnings. Nearly double the value. The difference is entirely in how the businesses were built and maintained.

The Sale Process

Franchise resales typically follow this path:

1. Preparation (3-6 months before listing): Clean up financials, address deferred maintenance, document systems, develop your narrative. Consider hiring a business broker with franchise experience.

2. Valuation and listing: Your broker runs comps, analyzes your financials, and recommends a listing price. The business goes to market through franchise resale platforms, broker networks, and sometimes direct outreach to potential buyers.

3. Buyer qualification: Serious buyers sign NDAs, review your financials, and tour the location. The franchisor typically must approve any buyer, so the buyer also begins the franchisor's qualification process.

4. Offer and negotiation: Buyers submit letters of intent (LOIs). You negotiate price, terms, transition period, and any seller financing or earnouts.

5. Due diligence: The buyer verifies everything — financials, leases, franchise agreement, equipment, legal issues. This typically takes 30-60 days. Problems discovered here renegotiate price or kill deals.

6. Closing: Attorneys draft purchase agreements. The franchisor approves the transfer. Funds move. Keys change hands. You typically agree to a 2-4 week transition period to train the new owner.

Total timeline from decision to sell to closing: 6-12 months for a healthy business. Longer for distressed sales or complex multi-unit portfolios.

The Broker Question

Should you use a business broker? For most franchise resales, yes.

What brokers provide: Accurate valuation, access to qualified buyers, confidential marketing, deal structuring, negotiation expertise, and project management through closing. Good brokers pay for themselves through higher sale prices and faster closings.

What brokers cost: Typically 8-12% of the sale price for small businesses, declining to 4-6% for larger deals. On a $300,000 sale, expect $24,000-$36,000 in broker fees.

When to skip the broker: If you have a buyer lined up (a competitor, a manager who wants to buy, or a franchisor-referred candidate), you may be able to negotiate directly with just attorney support. But most sellers overestimate their ability to run a sale process while also operating the business.

"You only sell your franchise once. The difference between a 2x and a 3x multiple on $150,000 SDE is $150,000 in your pocket. Invest the time and money to maximize your exit — you cannot go back and do it again."