Franchise Valuations Australia | IBV™

Read the executed franchise agreement, variations and disclosure material alongside the financial accounts. Establish the remaining term, renewal provisions, territory, exclusivity, approved channels, transfer conditions, fees and termination rights. Do not assume that a relationship which has continued for years gives the franchisee an unconditional right to keep trading indefinitely.

A territory may protect some sales but not others. Online orders, delivery platforms, corporate customers and nearby network outlets may be allocated differently under the agreement. Review what happens in practice, including customer routing and any changes already announced at the valuation date. Customer demand that the outlet cannot retain under its actual rights should not be treated as unrestricted transferable revenue.

Australian franchises are subject to the ACCC's franchising framework. The new Code took effect on 1 April 2025, with specified additional requirements applying from 1 November 2025. Application can depend on when an agreement was entered into, renewed, extended or transferred. A lawyer should establish which Code provisions and transitional arrangements apply to the agreement and the contemplated transaction. A business valuation does not determine contractual enforceability, certify Code compliance or replace legal due diligence.

An owner may manage staff, work on the counter, perform sales calls, handle administration and cover absences. Removing their remuneration from expenses without allowing for necessary replacement work can overstate transferable earnings. Establish the duties, hours, qualifications and realistic employment on-costs of the replacement role or roles.

Drawings, dividends and shareholder loan movements are not automatically operating expenses that can be added back. Check how each payment was recorded. Related-party rent and family wages also require commercial analysis: an adjustment may reduce earnings rather than increase them. A claimed one-off expense needs evidence and an assessment of whether similar expenditure will recur.

Where contributions go to a specific-purpose fund, review the applicable disclosure and financial reporting obligations as well as the outlet cost. The ACCC specific-purpose fund guidance addresses the broadened rules from November 2025; fund contributions are not automatically discretionary owner expenses.

Network training and manuals may reduce dependence on the seller, but systems still need people to operate them. Review the manager's tenure, staff turnover, award classification questions, leave balances and recruitment capacity. Employment and payroll issues should be checked by appropriate advisers. The normalised earnings article explains why an adjustment is not justified merely because it improves the result.

A long property lease does not by itself extend the franchise agreement, and a franchise renewal does not guarantee access to the current premises. Compare commencement dates, remaining terms, options, notice requirements, permitted use, rent reviews and make-good obligations. Determine whether the franchisee leases directly, occupies under a sublease or relies on a licence linked to the network.

Location-based franchises may depend on foot traffic, parking, visibility, nearby development and trading-hour restrictions. Mobile or territory-based businesses instead need evidence of service coverage, travel time, route density and vehicle requirements. Assess the local operating model rather than importing assumptions from an unrelated outlet format.

Forecasts should not silently assume a fresh agreement or lease on unchanged terms. Renewal uncertainty, relocation expenditure and an interruption to trading may require explicit scenarios. Legal advice should inform the rights and conditions being modelled; the valuer then assesses their economic consequences on the instructed basis.

The cost of maintaining the brand's required presentation can be significant. Obtain current fit-out standards, notices, capital expenditure plans and equipment condition records. Distinguish normal maintenance from a mandatory refurbishment, an optional expansion and expenditure needed to address existing defects. Establish who bears each cost and when payment is expected.

EBITDA is not cash available to withdraw: it does not deduct replacement capital expenditure or changes in working capital. A discounted cash-flow analysis can model the timing of a refurbishment and any associated closure. An earnings-based assessment must remain consistent with the investment burden reflected in its earnings measure and valuation factor. Do not deduct the same expenditure twice through both cash-flow adjustments and an unrelated blanket discount.

Confirm ownership and finance for equipment, signage, vehicles and fixtures. Some items may belong to the franchisor, a landlord or a financier. A PPSR search can assist in identifying registered security interests, but does not replace the underlying agreements or specialist advice on their effect. A separate plant assessment may be useful where asset condition or realisable value materially affects the analysis.

A franchisee may build local goodwill through service quality, repeat customers, staff capability and its location. But it does not ordinarily own the franchisor's trade mark merely because it trades under it. Review the licence and the ability to retain customers after transfer, including access to customer records, booking systems and digital accounts.

Customer lists, delivery-platform ratings and local social accounts may have different owners or transfer restrictions. Privacy and contractual obligations need review before assuming information can be provided to or used by a buyer. An outlet's observed sales history is evidence; it is not a guarantee that customers or network support will remain unchanged.

An earnings-derived operating value may already reflect the benefits of goodwill and ordinary equipment. Adding a separate amount for the brand, fit-out or customer base can double count those benefits. If specific intangible rights require separate assessment, define their ownership and valuation purpose rather than treating every marketing label as an additional asset.

The existence of local goodwill does not necessarily establish an entitlement to compensation when a franchise agreement expires. The valuation should distinguish goodwill supported by transferable business rights from benefits dependent on continued access to the franchisor's brand and systems. Contractual expiry, renewal conditions and any applicable compensation rights should be assessed separately.

A stable outlet with representative earnings may support capitalisation of maintainable earnings. A business facing a major refurbishment, changed fee schedule, short agreement term or multi-site expansion may need explicit cash-flow modelling. Asset-based analysis can provide another perspective where earnings are weak, but accounting fit-out costs are not a guaranteed minimum value after removal costs and liabilities.

Completed sales in the same network may be informative if their evidence is reliable. Check outlet format, location, remaining agreement and lease terms, earnings definitions, stock treatment, capital commitments and whether the transaction involved shares or assets. An advertised asking price or a network-wide average is not a valuation of the subject business. No universal franchise multiple is recommended here.

For a multi-site operator, assess site-level results and genuine shared overheads. Do not value each outlet using profits that omit central management and then add the sites together. Nor should identical multiples be assumed for stores with different lease security, maturity or investment requirements. The business valuation methods guide explains matching the rate or multiple to the cash flow being valued.

Gather relevant financial statements, current monthly accounts and outlet-level sales; the signed franchise agreement and variations; current disclosure material and notices; royalty and marketing invoices; supply terms; leases and occupancy documents; equipment registers and finance schedules; refurbishment requirements; and owner and staff responsibilities. Include correspondence about renewal, transfer, defaults or proposed network changes. Share relevant records confidentially through the agreed engagement process.

IBV™ provides a defined business valuation, not a franchise recommendation, legal compliance certificate or guarantee of investment returns. Dr Patrick Hillenbrand is an AVI Certified Business Valuer; IBV voluntarily aligns its work with relevant APES 225 principles and applies the IBV™ Independence Guarantee. Tell us whether the report is for preliminary owner planning, a purchase, a sale, a shareholder change or a tax purpose, and who will rely on it. Purpose and reliance—not turnover—determine the engagement. Compare valuations and Fixed Professional Fees before requesting the agreed scope.