Franchise Resale: How to Buy an Existing Franchise Location

Why Consider a Franchise Resale?

Starting a franchise from scratch means months of construction, hiring, training, and slow initial sales while you build a customer base. Buying an existing franchise location lets you skip all of that and step into a business with established revenue, trained staff, and a proven market presence.

Franchise resales represent a massive and often overlooked segment of the franchise market. Every year, thousands of franchise locations change hands — some because owners are retiring, relocating, or moving on to other opportunities; others because the business is underperforming and the owner wants out.

Both scenarios can represent excellent buying opportunities, provided you approach the process with the right due diligence framework.

New Franchise vs. Resale: A Complete Comparison

Factor	New Franchise	Resale
Revenue from day one	No — ramp-up period of 6-18 months	Yes — existing customer base and revenue stream
Startup timeline	6-12 months (site selection, build-out, hiring)	30-90 days (approval and training period)
Total cost	Item 7 estimate (known range)	Negotiable — may be above or below new unit cost
Financial history	None — projections only	Actual P&L statements, tax returns, sales data
Staff	Must hire and train entirely	Existing team (may be an asset or a liability)
Location	You choose (within territory)	Fixed — you inherit the existing site
Equipment condition	Brand new	Used — may need replacement or upgrades soon
Lease terms	You negotiate fresh	You inherit existing lease (or negotiate new one)
Franchisor support	Full new-owner support package	Transfer training — often less thorough
Franchise agreement	Current standard terms	Must sign the then-current agreement
Risk profile	Higher uncertainty, more upside potential	Lower uncertainty, more predictable outcomes
Negotiation leverage	Minimal — standard franchise fee	Significant — price is market-driven

How to Find Franchise Resales

Franchisor-Facilitated Resales

The best starting point is often the franchisor itself. Most franchise systems have internal processes for matching exiting franchisees with qualified buyers. Advantages:

• The franchisor knows which locations are available before they hit the open market
• They can provide context on each location’s performance relative to the system
• The approval process is smoother when the franchisor is facilitating the transaction

Contact the franchisor’s franchise development team and ask about available resale opportunities. Some brands maintain dedicated resale pages on their websites.

Online Marketplaces

Several platforms specialize in franchise and business-for-sale listings:

• BizBuySell — The largest business-for-sale marketplace in the U.S. with solid franchise filtering
• Franchise Resales — Focused specifically on franchise resale opportunities
• BusinessBroker.net — Wide range of business listings including franchises
• LoopNet — Useful for finding franchise locations that include real estate

Business Brokers

Franchise-specialized business brokers can be valuable partners. They:

• Have access to off-market listings
• Understand franchise-specific valuation methods
• Can handle the franchisor approval process
• Help structure deals that work for both parties

The broker’s commission (typically 8-12% of the sale price) is usually paid by the seller.

Direct Outreach

Item 20 of the FDD provides contact information for all current franchisees and those who left the system in the past year. You can reach out directly to franchisees in markets you are interested in. Not every franchisee who would consider selling has listed their business — sometimes a well-timed inquiry opens a door.

Valuing a Franchise Resale

This is where most buyers either overpay or miss a genuine bargain. Franchise resale valuation is both art and science.

Primary Valuation Methods

1. Multiple of Seller’s Discretionary Earnings (SDE)

SDE represents the total financial benefit to a single owner-operator. It includes net profit plus the owner’s salary, benefits, and any personal expenses run through the business. SDE multiples for franchise resales typically range from 1.5x to 4x, depending on:

• Brand strength and system health
• Location quality and lease terms
• Revenue trend (growing, stable, or declining)
• Remaining franchise agreement term
• Equipment condition

2. Multiple of EBITDA

For larger or multi-unit franchise operations, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the more common metric. EBITDA multiples for franchise resales typically range from 3x to 6x.

3. Asset-Based Valuation

For underperforming or distressed franchise locations, the value may be driven primarily by tangible assets — equipment, inventory, leasehold improvements, and the remaining value of the franchise agreement. This typically represents the floor valuation.

Valuation Adjustments

Adjust the base valuation for these factors:

Factor	Positive Adjustment	Negative Adjustment
Revenue trend	Consistent growth over 3+ years	Declining revenue over 2+ years
Lease terms	Below-market rent, long remaining term	Above-market rent, lease expiring soon
Equipment age	Recently upgraded, good condition	Old equipment needing replacement (estimate cost)
Staff quality	Experienced, stable team with low turnover	High turnover, key position vacancies
Location quality	High traffic, growing area	Declining area, construction, new competition
Franchise agreement	Long remaining term, favorable provisions	Short remaining term, approaching renewal
Reason for sale	Owner retiring after successful operation	Owner leaving due to business difficulties

What a Fair Price Looks Like

A reasonable starting framework:

• High-performing location (growing revenue, strong brand): 3-4x SDE
• Stable location (consistent revenue, established market): 2-3x SDE
• Underperforming location (declining revenue, operational issues): 1-2x SDE
• Distressed location (losing money, needs turnaround): Asset value only

Always compare the resale price to the cost of opening a new unit in the same system. If a resale costs much more than a new franchise, the premium must be justified by the existing revenue and customer base.

The Transfer and Approval Process

Step 1: Letter of Intent (LOI)

Once you identify a target location and agree on preliminary terms, you and the seller execute a letter of intent. The LOI typically includes:

• Proposed purchase price
• Deal structure (asset purchase vs. equity purchase)
• Due diligence period (usually 30-60 days)
• Key contingencies (financing approval, franchisor approval, lease assignment)
• Confidentiality provisions

Step 2: Franchisor Application

You must apply to the franchisor as a new franchisee. This includes:

• Submitting a franchise application
• Meeting financial qualifications (net worth, liquidity requirements)
• Completing an interview or discovery day
• Passing any background checks

Critical point: The franchisor can reject you even if the seller accepts your offer. Start the franchisor application process as early as possible.

Step 3: Due Diligence

This is your investigation period. For a franchise resale, due diligence goes beyond the standard FDD review:

Financial due diligence:

• Request 3-5 years of profit and loss statements
• Review tax returns to verify reported revenue
• Analyze monthly revenue trends (seasonality, growth trajectory)
• Review all current contracts and obligations
• Verify accounts receivable and accounts payable
• Understand any pending or contingent liabilities

Operational due diligence:

• Visit the location multiple times at different hours and days
• Assess equipment condition (get a professional inspection for expensive items)
• Review employee files, tenure, and compensation
• Evaluate customer reviews and reputation (Google, Yelp, social media)
• Assess compliance with current brand standards (will remodeling be required?)

Lease due diligence:

• Review the current lease terms, remaining term, and renewal options
• Understand assignment and transfer provisions
• Verify rent relative to market rates
• Check for personal guarantees or other encumbrances
• Confirm the landlord’s willingness to consent to the lease transfer

Franchise agreement due diligence:

• Review the franchise agreement you will be required to sign (the then-current version)
• Compare it to the seller’s existing agreement for any significant changes
• Understand the remaining term and renewal conditions
• Identify any performance requirements or pending compliance issues

Step 4: Financing

If you need financing, begin the process in parallel with due diligence. SBA lenders are generally comfortable with franchise resales, especially when the location has a documented track record of profitability.

Provide the lender with the location’s historical financials in addition to the standard documentation required for new franchise loans. Existing revenue history typically strengthens your application.

Step 5: Closing

Once the franchisor approves you, financing is secured, and due diligence is satisfactory:

• Finalize the purchase agreement with all terms and representations
• Complete the lease assignment or negotiate a new lease
• Sign the new franchise agreement with the franchisor
• Pay the transfer fee
• Complete required initial training with the franchisor
• Close the transaction and take ownership

Plan for a 2-4 week transition period where the seller introduces you to key staff, suppliers, and customers. Some franchise systems formalize this handover process.

Negotiation Strategies for Resale Buyers

Leverage Points

• Time pressure — Sellers who need to exit quickly (relocation, health issues, other investments) are more negotiable on price
• Identified issues — Any problems found during due diligence are legitimate reasons to negotiate a price reduction
• Financing contingency — The ability to close quickly with pre-approved financing gives you bargaining power
• Franchisor requirements — If the franchisor requires upgrades or remodeling, factor those costs into your offer

Deal Structure Options

• All-cash at closing — Simplest structure, often gets the lowest price
• Seller financing — The seller carries a note for a portion of the purchase price (10-30%). This keeps the seller invested in a smooth transition and reduces your upfront capital requirement.
• Earnout — A portion of the price is contingent on the business hitting performance targets after closing. Useful when buyer and seller disagree on value.
• Asset purchase vs. equity purchase — Most franchise resales are structured as asset purchases, which provides the buyer with tax benefits (depreciation of assets at current fair market value) and avoids inheriting unknown liabilities.

Common Mistakes to Avoid

1. Skipping the FDD review — Even though you are buying an existing location, you must receive and review the current FDD. The franchisor’s current terms may differ dramatically from what the seller is operating under.
2. Trusting the seller’s financials without verification — Always verify revenue and expenses through tax returns, bank statements, and point-of-sale system reports.
3. Ignoring deferred maintenance — Old equipment, needed remodels, or deferred repairs become your problem the day you close.
4. Underestimating working capital needs — Even with existing revenue, you need reserves for unexpected issues during the ownership transition.
5. Not talking to other franchisees — Current franchisees can provide context on the location’s reputation within the system, the franchisor’s support quality, and any systemic issues that might not be obvious from financial statements alone.

Find Your Franchise Opportunity

If you’re exploring new franchise opportunities or evaluating resale possibilities, thorough research on the franchise system itself is essential. Use VetMyFranchise to analyze franchise FDDs, understand fee structures, and evaluate franchise system health before you commit.

Our franchise comparison tool helps you compare brands side by side — assessing financial performance, franchisee satisfaction, and system growth trends — so you can determine which franchise systems are worth pursuing, whether through a new unit or a resale.

The best franchise resale deals go to buyers who understand the system as well as they understand the specific location.