Costs and pricing
Part of Buying a Franchise Resale UK: Checks Before You Offer
Buying a Franchise Resale UK: Checks Before You Offer
Buying a franchise resale in the UK: the transfer terms to request, where units are listed, who to check and how to test the asking price before you offer.
What to take away
- Ask for the transfer terms before you view a unit or discuss price.
- A listing is a leadit shows turnover and an asking price, not net profit.
- Check the seller, the franchisor and two franchisees who have no stake in the sale.
- Test the price last, on the maintainable profit of one unit after every fee.
- Budget for the transfer fee, retraining, refurbishment, stock and working capital on top of the price.
Ask for the transfer terms first
Franchise agreements commonly make a sale subject to the franchisor's written consent, so the terms come before the price. Before viewing the unit, ask for the assignment or change-of-control clause, the transfer application or checklist, and any variation letter.
Then check the requirements for buyer training, approval, the remaining agreement term and any required refurbishment. The agreement and the franchisor's transfer policy should identify the fee, who pays it and what happens if consent is refused or the deal falls through. Get the amount, refund conditions and payer confirmed in writing before treating the transfer as viable.
UK franchising has no single statute, so your contract carries the weight. BFA members sign up to a code of ethics that expects clear written terms. The code is not law, so non-members are not bound by it.
Where to find a resale unit
Resale stock appears in three places: franchise listing sites, general business transfer agents and franchisors' own registers. The third route is the least visible, and often the strongest, because the franchisor knows the unit's numbers and wants a capable operator in place.
Search BusinessesForSale.com, Daltons Business and Rightbiz for advertised UK resales. These are asking-price leads, not verified completed-sale evidence; ask for supporting figures before using an advert as a comparable. Register interest with franchisors whose model fits, even when nothing is advertised.
Listings usually show turnover and an asking price, and say little about net profit. Treat the missing figure as the first question you ask.
Check the seller and the franchisor
Check both before you trust any listing. Companies House provides free company details such as the registered address and date of incorporation, and its filing history shows accounts, director changes and any charges over the business.
Ask to speak to the outgoing operator, and then to two franchisees in the same network who have no stake in the sale. Work through the warning signs in a franchisor's disclosure pack before you commission a survey.
| What to check | Where the evidence sits |
|---|---|
| Trading history and ownership | Filing history for the company and its directors |
| Solvency signals | Accounts and charges, plus any Gazette notices linked from the same record |
| Lease and premises | The landlord's written consent to assign, followed by a survey |
| Equipment and stock | A physical inventory, read against the franchisor's specification |
| Historic figures | ONS inflation and price indices to restate older years at current prices |
| Staff and customer contracts | The unit's own records, plus the franchisor's approval where the agreement requires it |
Employees commonly transfer with the unit on their existing terms, so ask for the payroll file and any notice or holiday liabilities.
What the transfer costs on top of the price
Transfer costs come on top of the asking price. Franchisors may charge for approving a transfer, including administration, retraining, re-issuing the agreement and sometimes a fresh term.
The fee may be a fixed sum, a percentage of the sale price, or both; there is no single standard amount to assume across UK agreements. Ask for an itemised written quote stating who pays, when it falls due, whether it is refundable if consent is refused, and whether VAT is added.
Add refurbishment, stock and working capital to the budget as separate lines. Ask the franchisor for a written fee schedule that applies to a new transferee.
Test the asking price last
The asking price is the seller's figure, so test it only after the checks above. Work through five steps in order and keep every assumption in one spreadsheet. The aim is one defensible figure: the profit a new owner can expect after every cost the new owner will carry.
- Verify the trading baseline.Reconcile the seller's filed accounts with the unit's management accounts and trading records, and resolve differences before using turnover or profit.
- Normalise earnings.Recast profit as seller's discretionary earnings (SDE) for an owner-operator comparison, or EBITDA for a manager-run comparison. Add back only evidenced, non-recurring costs, and include recurring franchise fees, royalties and marketing levies. Add back owner's pay only when it sits in the starting profit and the buyer will take on that role; deduct a replacement manager's salary where needed.
- Allow for cash needs and assets.Check maintenance capital expenditure, stock, working capital and any debt or liabilities included in the deal. Avoid counting assets twice when the earnings valuation already assumes them.
- Cross-check the methods.Apply an earnings multiple to normalised SDE or EBITDA where suitable. Discounted cash flow values forecast cash flows on stated assumptions, and a payback test checks the return against total cash invested. A turnover multiple is useful only with genuinely comparable businesses and margins.
- Test the multiple, then price the offer.Seek completed-sale evidence for comparable units from the franchisor or a transfer agent such as Christie & Co. Compare franchise model, territory, lease, remaining agreement term, fee package and trading performance. If none exists, label the multiple an assumption, not a market fact.
Five-step valuation sequence
- Rebuild three years of profit and loss
- Deduct service fee, levy, equipment
- Charge market salary for seller's hours
- Divide asking price by maintainable profit
- Compare multiple with local independents
Illustrative figures only. A unit asks £95,000. The last full year shows £210,000 turnover and £38,000 profit before the owner's pay. Take off £6,000 for a manager's salary and £4,500 for the fees the buyer now carries, leaving maintainable profit of £27,500. The asking price is roughly 3.5 times that.
Worked example: £95,000 asking price
- £95,000Asking price
- £38,000Profit before owner's pay
- £27,500Maintainable profit
- 3.5xEarnings multiple
This is the asking price divided by the adjusted profit, not evidence that 3.5 times is a suitable market multiple. Check what the £4,500 covers and include only recurring buyer-borne costs in maintainable profit; account for one-off transfer costs separately.
Common questions
Can an asking price be used as a valuation?
No. It is the seller's figure. Divided by adjusted profit it gives a ratio, but only completed sales of comparable units show what the market pays, and public asking prices are not completed-sale evidence.
How long does a franchise resale take to complete?
Plan for a few months rather than weeks. The franchisor's approval, any retraining and the landlord's consent all sit on the critical path.
Do I pay VAT on the purchase price?
If the sale qualifies as a transfer of a going concern, the price usually falls outside the scope of VAT. Check the conditions and the registration threshold on GOV.UK's VAT registration guidance before you assume either way.
Can I raise finance against a resale unit?
Lenders assess the unit's accounts and your experience, not the brand alone. A valuation built on maintainable profit, with the assumptions written down, gives a credit manager something to work with.
