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BizBuySell: Great for Businesses, Terrible for Franchises (2024)
Written by: Patrick Findaro
Last Updated by
Ailen Faiad: January 18, 2023
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Are you looking for a franchise for sale? Perhaps you’re looking to maybe start a new franchise and you want to see what the resale value is for franchise. At Vetted Biz, we look through all different types of source to see what the franchise resale value is, one of those resources. BizBuySell, I’m going to through how you can find directly the data to look at what a reasonable franchise resale is, or even if you just wanna find a franchise resale and you don’t want toa start your business from scratch.
Bizbuysell.com is a top site for businesses for sale and they do have a decent selection of franchise resales. But in our opinion, it’s an awful source of information for franchise opportunities in the United States.
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BizBuySell Prices
The asking price of a business for sale on BizBuySell usually closes at like a 10% discount. If someone’s selling, say a Burger King for $1,000,000, they’re listing it for $1,000,000 but by the time the buyer puts the offer, does the due diligence, maybe adjust the final purchase price, it’s gonna be transacted at, $900,000 on average. Now there’s a bidding process. A lot of times the price gets drawn up, especially if you’re selling five, or 10 franchise locations, as well as if it’s a very well-known brand with amazing EBITDA, etc.
The price can go up. But this is in general where the value you see online, whether it’s on BizBuySell, Franchise Flipper, or other different websites that have resales for franchises, usually there’s gonna be a discount of 10%. Now, going back to the original attention of today’s episodes, how to find franchise resales on BizBuySell, because it’s not super intuitive, it took me a good 10 minutes to figure out how to search for franchise resales.
BizBuySell Browsing Mode
What I do first go to, bizbuysell.com, click on the Buy a Business drop-down and then search for the business. And it’s gonna bring you to whatever state you’re in. You’re gonna wanna hit X. On my screen, I hit X on the state of Florida and take out Florida. I see locations across the United States, then I go to More Filters. And in the More Filters tab is where I’m going to type in the franchise. Let’s just go on Subway.
Subway has 1,000s locations in the United States, and I can see that there are 226 results for Subway. Now, maybe 80% of these are Subway restaurants. Others are stores or businesses that are for sale that are right next to a Subway. And the business wants to highlight that a Subway is right next to it. But you can see Subways for sale at 135,000 for one in, Illinois, and there is a Subway for sale for 69,000 in Marin County, California, with a cash flow of 72,000.
If you’re going to open a Subway according to their latest FDD from 2022, you’re looking at investing 183,000 to $507,000. The resale value, what I’m seeing here on BizBuySale, with 100s of Subways for sale is, it’s usually a 100K, 150K to buy an existing Subway. So, with Subway, it has to really make a lot of sense to open a new Subway location, if you’re able to buy a resale at 100,000, 150,000.
What Factors are Important to Observe Before Investing
There are some red flags that we like to look at Vetted Biz, where, if you’re reviewing websites like BizBuySell, or directly the aggregate information and the data that we have on vettedbiz.com, and you see the resale value, the midpoint is higher than the investment midpoint, that’s a red flag because ideally, you build a business, you open it from scratch, you should have sweat equity built into that and someone’s paying you a premium to buy your existing running business.
BizBuySell, there are a few others like businessesforsale.com and other business-for-sale websites, dealstream.com, that you can search for franchise resales. And if you’re looking to open up a franchise from zero, you’ve gotta know what the franchise resale value is. This is an easy way that in five minutes, you should be able to pull it up, especially for bigger brand concepts, leveraging sites like BizBuySell.
But as you go through the due diligence, try to talk to some former franchisees that have recently sold their business, and over the prior three years for franchises across the United States, roughly 15% of them have traded hands, if not more. There should be a lot of people to contact, especially if the brand’s been around for a while. I hope you found this video informational. If there are other ways and resources you think we should evaluate for franchise resales, we’d love to hear from you.
The Pros and Cons of BizBuySell
Now let’s start with the positive. BizBuySell has been the dominant force in the business-for-sale marketplace in the United States for 20-plus years. There are newcomers like Flippa selling websites, and apps. But no one has the web traffic and the number of opportunities as bizbuysell.com.
They’re mostly focused on selling existing businesses and franchise resales. And comprise a very small percentage of the businesses for sale on their website. They’re part of CoStar, which is a publicly-traded company based in my home city of Washington, D.C., And BizBuySell is part of the marketplace division that includes BizQuest, FindaFranchise, apartments.com, LoopNet, as well as Lands of America.
Focusing a bit on where we are right now in Miami, Florida. BizBuySell has over 1,500 businesses for sale in the state of Florida listed on its website. And there are about 5,000 franchise resales across the whole United States on BizBuySell.
Right now, we’re gonna go through a few of those franchise resales. And keep in mind, this ranges anywhere from a $60 million group of franchise businesses down to a few thousand dollars.
What you need to know about BizBuySell
One of the big issues I’ve been having with BizBuySell, it’s hard to navigate the site. It’s tough to figure out and sort…There’s no feature where you can sort by franchises like some other franchise resell sites have like franchiseflippers.com where you can sort brand by brand.
And then looking at four franchises for sale that are accessible for non-millionaires, you have a 7-Eleven for sale at $441,000 that has a cash flow of over $200k. So not a bad multiple. And the owner is making $175,000 from this business. If you were to open up a 7-Eleven, it would be around $400,000 depending on the location. So this could be a good way to fast-track finding the site, build-out, and time to break even by just buying an existing 7-Eleven franchise.
What to Consider When Buying a Franchise
They also have a smoothie franchise for sale on the website, but they don’t disclose the name. It’s for sale for about $300,000 and has a cash flow of $120k. So again, the multiple is pretty reasonable, especially if it’s operated mostly by the owner.
So under $200,000, you know, there’s a bubble tea franchise in Texas, $170,000. It’s for sale in Texas, but there are no financials. So it’s probably not making much money. And then you do have a donut franchise for sale at $75,000 that does $168,000 in sales but only $10k of cash flow. So if you’re gonna buy that business for $75k, you could be inheriting a big issue. And become a slave of the business where there’s not even enough margin to live off the business unless you have a massive turnaround.
A lot of people don’t know when there’s a transition in ownership. It’s pretty common for the earnings to go down 10% or 20% for the first year. Or so as the new owner gets up to speed on the business. Especially if it’s a B2B business or if there are some key accounts. There can be some accounts that drop off or there can be just some issues with the business that hits the bottom line.
Navigating the BizBuySell Marketplace for Franchises
In the state of Florida, there are thousands of business listings, and generally, the seller is willing to split their commission. Say they’re making 10% on a $1 million sale of a business, and they’re willing to split part of that up to 5% with the buyer broker, the person representing the buyer of the business. That’s not very commonplace in states like Texas, Arizona, California, and Nevada. You’re kind of on your own and you’re gonna have to spend a lot of time networking with business brokers, as well as just reaching out directly to these listings.
BizBuySell is a good place to start, to get your feet wet if you’re looking to buy an existing business, especially an independent business as all different industries are reflected on that site. But the information they have on franchise opportunities, especially if you’re starting to franchise from scratch is plain awful.
So on Vetted Biz, we have thousands of franchise listings. As of the date of this video, we have 3,600 franchise listings. BizBuySell has about 10% of that. So they have a little over 350 franchise opportunities that are seeking franchisees where, compared to Vetted Biz, we have about 3,600.
So they’re showing you a very small slice of what the franchise opportunities are that are available.
Why are they doing that? Because they make money through advertising. Franchisors are paying for banner ads, they’re paying per lead generation, and that’s what’s fueling the money that BizBuySell gets, so they’re more focused on appeasing the franchisors, or the business brokers, or the people selling the businesses than you, the consumer, trying to get information on businesses to buy.
BizBuySell and the Franchise Rule
Essentially, they want you to provide your information and then request not just from that one franchise that you sought out, but up to 20 franchises because they’re probably getting $30, $40, or $50 a lead every time that someone from their website marks that there’s interest in a franchise opportunity. So BizBuySell, in theory, could be getting about $1,000 for just one lead to their website that requests information on 20 franchise opportunities.
Are these even really franchise opportunities? This is the part that I don’t like where they’re showing businesses under the franchise portal that are not franchises. So they’re not protected by the FTC, the Franchise Rule. They’re business opportunities that are lightly regulated where the seller of that business opportunity.
So just a quick look The first 10 franchise opportunities listed on bizbuysell.com are not even franchises. So 5 of the first 10 are not franchises. So about 50% are not franchises when you look at the first 10 entries on the Franchise Opportunity section on BizBuySell, and that includes different opportunities like BizFundingFinder and top franchises.
Conclusion
BizBuySell, you know, I’m happy to collaborate if there’s anyone from CoStar or bizbuysell.com, any of the executives.
Would love to collaborate. Perhaps we could give you some of the franchise data that we have on the thousands of opportunities, and there’s some way to work together as BizBuySell is doing a great job in terms of their businesses for sale and there are thousands of opportunities. But on the franchise section of the site, it falls short, and I think it’s a big disservice to the prospective franchise buyer as you’re showing about 10% of the opportunities. And those 10% opportunities are generally franchises that need to be advertising heavily to even get franchisees.
A lot of bad franchise opportunities, and a lot of business opportunities that are listed as franchise opportunities. BizBuySell is a good start to finding a prospective business for sale, awful resource right now in its current state for finding a franchise.
