Guide to Buying a Franchise on BizBuySell: Tips for Success

Introduction

Are you looking for a franchise for sale, or considering starting a new franchise and want to assess its resale value? At Vetted Biz, we explore various resources to determine franchise resale values, including BizBuySell.

Asking Price Of A Business For Sale

The asking price of a business listed on BizBuySell typically closes at around a 10% discount. For instance, if a Burger King franchise is listed for $1 million, it might close at $900,000 after due diligence and negotiation. The final price can sometimes increase due to bidding, especially for larger, well-known brands.

How To Find Franchise Resales On BizBuySell

Finding franchise resales on BizBuySell is not straightforward. Here's how to do it:

1. Go to bizbuysell.com.
2. Click on "Buy a Business" from the dropdown menu and search for a business.
3. Close the state-specific window to view listings across the United States.
4. Use the "More Filters" option to enter the specific franchise you are interested in, such as Subway.

You may find varying prices for franchises, such as a Subway listed at $135,000 in Illinois, or one at $69,000 in Marin County, California, with a cash flow of $72,000. Often, resale prices are much lower than the original cost to open a new franchise location, indicating potential issues with the brand's profitability.

Red Flag: Resale Value Midpoint

A red flag to watch for is when the resale value midpoint is lower than the original investment midpoint. For example, opening a new Subway franchise can cost between $183,000 and $507,000, but resales are commonly listed at $100,000 to $150,000. Ideally, a business built from scratch should have value added over time, meaning the resale should be higher than the initial investment.

Conclusion

To assess franchise resale values, use websites like BizBuySell, BusinessesForSale.com, and DealStream.com. Knowing the resale value is crucial when considering opening a new franchise. You can also reach out to former franchisees who have recently sold their businesses to gather insights. For well-established brands, franchise ownership changes hands often, so there are opportunities to learn from those experiences.