Valuation of Resales

With consumer confidence shooting straight up and business growth all around us, everyone seems to be focused on opening a business.  But what about selling a business?  Every person who starts a business will, one day, want to sell their business.  Anecdotally, we know that franchised businesses are easier to sell and sell at a higher value.  There are many reasons for this, and it seems to be consistent over time and across industry.  However, we have never had a comprehensive, scholarly study of the topic – until now.

Last week I was attending the Advisory Board Meeting for the Titus Center of Franchising (Palm Beach Atlantic University) and Dr. John Hayes shared with us an abstract of his latest study on franchising. This study is focused on resale valuation of franchised vs non franchised businesses. The study has completed peer review and is scheduled to be published in the Journal of Economic and Business Studies, Spring 2022.  The study is titled Determinants Impacting Resale Premium Disparity when Selling a Small Business: A predictive Non-Linear Approach.  By Dr John Hayes, Dr. David Smith and Dr. Mary Kay Copeland.

Using a dataset of 2,159 resales over a 10 year period, ‘findings confirm that franchise firms receive a higher resale premium when compared with non-franchise firms’.  At this point we do not have access to the entire study, however, we do know that the study confirms what many of us have always known.  Owning a franchise not only allows you to open a business with fewer bumps, it also allows you to sell your business more readily and at a higher value.

When the study is formally published, I will forward a link.

Wishing you an exceptional summer as we move out of our Covid mindset and into a brighter future.

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