Franchise business valuations | IBV™

Provide franchise and lease agreements, fee schedules, trading records and any notices affecting renewal or transfer. Royalties, marketing contributions, required purchases and refurbishment commitments can influence maintainable earnings. Clarify whether reported costs fully reflect those obligations, and identify any temporary concessions so they are not automatically treated as ongoing benefits available to a purchaser.

The report can distinguish operating performance from agreement-related assumptions and one-off costs. Comparable evidence, where available and relevant, needs adjustment for differences in term, location and obligations. A network-wide performance claim is not a substitute for evidence about the particular outlet, especially where owner involvement, local competition or required capital spending differs from other locations.

Purchase, sale and dispute instructions may require different assumptions about transfer and remaining rights. Agree the purpose and date before commissioning work. Buyers may also need buyer due diligence valuation, while legal review should address disclosure, contract terms and consent. No valuation conclusion guarantees franchisor approval, renewal or a particular sale result.

Analyse sales through to cash retained by the franchisee. Identify the base on which royalties and other contributions are calculated, including whether fees remain payable when discounting reduces the outlet's margin. Review actual supplier invoices and promotional results rather than assuming network purchasing power always produces a local cost advantage. A strong system can still contain outlets with weak economics.

The ACCC explains that the disclosure document helps prospective and existing franchisees make informed decisions and contains prescribed information. 1 Use it alongside outlet records to identify obligations and questions. It is not a substitute for evidence that the particular site can cover its labour, occupancy and system costs at a sustainable sales level.

Map the decisions the franchisee controls and those made elsewhere. Product ranges, supplier rules, digital platforms and promotional campaigns can affect margin even when the outlet's local management performs well. Determine whether reported online sales are attributed to the outlet, a central platform or another territory, and which costs accompany that allocation.

Test practical sensitivities, such as a higher mandatory input cost or a promotion that increases volume but lowers contribution per transaction. Do not assume the franchisee can solve every margin problem by raising prices or switching suppliers. A valuation should reflect the operating flexibility actually available. When using other outlets as comparisons, check whether they faced the same platform arrangements, product requirements and local delivery economics during the periods being compared.

Separate the benefits of the network from those created by the location, team and local customer relationships. The franchisee may benefit from a recognised trade mark without owning that mark or having unrestricted rights to use it after exit. Ask what a purchaser would actually receive and what customer demand depends on continued participation in the system.

In a hypothetical outlet, a seller points to strong historical cash flow but the buyer must fund a substantial refit. Show the expenditure and any operating disruption in the forecast rather than treating the historical margin as freely available forever. Distinguish asset replacement that sustains current trade from expansion intended to create new capacity. Otherwise, the same improvement can be assumed to increase earnings while its cost is overlooked.

Before relying on network averages, ask whether they include closed outlets, newly opened sites or unusually large formats. Request the definitions behind sales and earnings measures, and identify whether owner labour is included consistently. The resulting assessment should describe this outlet's economic position within its actual system, not imply that the brand's popularity establishes resale value. Where information is incomplete, a narrower, clearly conditional conclusion is more useful than a precise-looking number based on unsupported network comparisons. Document which network statements were independently supported and which remain assumptions supplied by the seller or franchisor.

See our fixed-fee valuation packages and confirm the scope and fee before commissioning work. Confirm the purpose, intended users, information requirements and inclusions in a written engagement before work begins. Calculated Value and Limited Scope delivery is 5–7 business days from complete financial information and a signed engagement. Full Conclusion timing is confirmed individually in the engagement letter. Specialist requirements or changes to the instruction may affect suitability and timing; confirm these before relying on an external deadline.