Business Valuation Guide
What Is a Franchise Worth?
Most franchises sell for 1.8x to 3.2x Seller's Discretionary Earnings, with the midpoint near 2.5x. A franchise with $250,000 of SDE would typically fall between $450,000 and $800,000.
By Curtis Hinds, Hedgestone Business Advisors · Updated 2026-08-19
A franchise resale is valued like any other business on its earnings, with one difference that overrides everything else: the franchisor must approve the buyer, and the franchise agreement dictates the terms. A strong brand can raise the multiple. A franchisor with restrictive transfer terms can lower it.
How to value a franchise
Start with Seller's Discretionary Earnings: net profit plus the owner's compensation, personal expenses run through the business, interest, depreciation and any genuinely one-time costs. That figure, not revenue, is what a buyer is purchasing.
Then apply the industry multiple. For franchises that band runs 1.8x to 3.2x, and where a specific business lands inside it is decided by the factors below. Typical SDE margin for this category runs around 14% of revenue, which is a useful sanity check: if your margin is far off that, the multiple moves with it.
Above roughly $1M to $2M of EBITDA the buyer pool changes. Individual buyers give way to private equity platforms and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x rather than a multiple of SDE.
What raises the value of a franchise
- A recognised brand with a healthy system-wide sales trend
- Long remaining term on the franchise agreement with renewal rights
- A manager running daily operations instead of the franchisee
- Territory protection written into the agreement
- Remodels and required capital expenditure already completed
What lowers it
- Franchise agreement nearing expiry with an expensive renewal or mandatory remodel
- Declining system-wide sales or negative franchisee sentiment
- Transfer fees and franchisor approval conditions that deter buyers
- Royalty and marketing fees that leave thin owner earnings
- Encroachment from newer units in the same territory
Who buys franchises
Existing multi-unit franchisees expanding, first-time owner-operators attracted by a proven system, and occasionally the franchisor itself exercising a right of first refusal.
Selling a franchise: what to expect
A typical sale runs 6 to 12 months from going to market to closing, assuming your financials are ready when you start. The franchisor sets your real timeline. Transfer approval, buyer training requirements and any right of first refusal all sit with them, so read the transfer clause of your agreement before you price anything.
The sequence is broadly the same in every category: establish the number, prepare a confidential profile, approach qualified buyers under NDA, negotiate a letter of intent, then survive diligence. Most deals that fail do so in diligence, and almost always because the books could not support what the marketing said.
Franchise appraisal vs market valuation
These are different instruments and the distinction costs owners money. A market valuation estimates what a buyer would actually pay, and is what you need to decide whether and when to sell. A formal appraisal is a certified document written to a defined standard, normally required only for litigation, divorce, estate or tax matters, or by a lender on the buyer's side.
For planning an exit, the market valuation is the right tool and costs a fraction of the appraisal. The value of a franchise in a sale is set by what a buyer will finance and pay, not by a certificate.
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Franchise valuation: common questions
How much is a franchise worth?
Franchise resales typically sell for roughly 1.8x to 3.2x Seller's Discretionary Earnings, though the range varies widely by brand. Strong brands with absentee-capable operations reach the top of the band, while brands requiring imminent costly remodels sell below it.
Do I need the franchisor's permission to sell?
Almost always yes. Nearly every franchise agreement requires franchisor approval of the buyer, charges a transfer fee, and often includes a right of first refusal. Start that conversation early, because it sets the real timeline for the sale.
Is a franchise worth more than an independent business?
Not automatically. A franchise brings brand recognition and systems, which help, but also royalties and mandated spending, which reduce owner earnings. Since valuation runs off earnings, a franchise only prices higher if the brand premium exceeds the fee drag.
What is the average price of a franchise?
There is no single average, because price tracks earnings rather than revenue. At the midpoint multiple of 2.5x SDE, franchises at $500,000 of SDE sell around $1,250,000, and at $1,000,000 of SDE around $2,500,000. Typical SDE margin in this category runs near 14% of revenue, so a franchise doing $1,000,000 in revenue would often carry about $140,000 of SDE and land near $350,000.
How much can I sell my franchise for?
Take your Seller's Discretionary Earnings and multiply by 1.8x to 3.2x. Where you land inside that band is decided by owner dependence, customer concentration, recurring revenue and the quality of your books. A franchise at the top of the range looks materially different from one at the bottom, and most of those differences can be improved in the twelve months before a sale.
What EBITDA multiple do franchises sell for?
SDE multiples of 1.8x to 3.2x apply to owner-operated franchises. Once earnings pass roughly $1M to $2M of EBITDA the buyer pool shifts to private equity and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x. The two are not comparable: SDE includes the owner's compensation and EBITDA does not, so the same business shows a higher SDE multiple than EBITDA multiple.
How long does it take to sell a franchise?
Typically 6 to 12 months from going to market to closing, assuming financials are ready. The franchisor sets your real timeline. Transfer approval, buyer training requirements and any right of first refusal all sit with them, so read the transfer clause of your agreement before you price anything.
What is the franchise valuation formula?
There is no formula unique to franchises. The method is the same one used across small business sales: recast earnings into Seller's Discretionary Earnings, then multiply by the industry band, which for franchises is 1.8x to 3.2x. Three valuation methods exist in principle. The income approach, applying a multiple to earnings, is what nearly every real transaction uses. The market approach compares against recorded sales of similar businesses and works as a cross-check. The asset approach values equipment and inventory and generally sets a floor rather than a price.
Is there a franchise valuation calculator?
Yes. The calculator on this page applies the same 1.8x to 3.2x band used throughout this guide, adjusted for owner dependence, margin quality and business age. It takes five inputs and returns a market range rather than a single figure, because real transaction prices move with deal structure and buyer type.
Do I need a franchise appraisal or a valuation?
A market valuation estimates what a buyer would likely pay and is what you need to decide whether to sell. A formal appraisal is a certified document prepared to a defined standard, and is normally required only for litigation, divorce, estate and tax matters, or an SBA loan on the buyer's side. For planning an exit, a market valuation is the right instrument and is far cheaper.
Multiples reflect broker transaction data including the BizBuySell Insight Report and aggregated 2024-2025 USA small business sales, and mirror the bands used by the Exit Ready valuation calculator. They are planning estimates, not a formal appraisal, and not investment advice. Market multiples move; this page was last updated 2026-08-19.