Agreement-led valuations for franchisees and franchisor systems.

A franchise business valuation values a bundle of contractual rights: the remaining term of the franchise agreement, its renewal options, the lease that must run with it, and the earnings left after royalties and marketing levies. Prismi prepares evidence-led franchisee valuations for resales, partner exits, family transfers and disputes, and separate engagements valuing the franchisor system itself.

When a franchise valuation is required

Franchise valuations are triggered by the same events as any private business — a sale, a partner exit, a family transfer, a relationship breakdown, a small business CGT concession claim — but the asset being valued is different in kind. A franchisee does not own freehold goodwill. It owns a bundle of contractual rights: the right to trade under the brand for a defined term, in a defined territory, from premises it may not control, subject to fees that never go away and a transfer it cannot complete without consent. Where the transfer is between related parties, s 116-30 substitutes market value for actual proceeds, so the file must be built to withstand review. A valuation that applies a generic industry multiple to last year's earnings without reading the agreement is not supportable, and the first sceptical reviewer — a buyer's accountant, a family lawyer or the ATO — will find the gap.

• ·Resale of the franchise to an incoming franchisee approved by the franchisor
• ·Partner or shareholder exit within the franchisee entity
• ·Family transfer or restructure, including Subdiv 328-G rollovers
• ·Small business CGT concession claims on exit (Div 152)
• ·Family law property settlements involving a franchised business
• ·Multi-unit consolidation or sale of a group of territories
• ·Franchisor system valuation for a capital raise, sale or founder restructure

The agreement and the lease must run together

Remaining agreement tenure is the single most important input. A franchise with two years to run and an uncertain renewal cannot support a maintainable-earnings capitalisation that assumes earnings continue indefinitely — the earnings horizon truncates, and the methodology may shift to a discounted cash flow over the remaining term with a probability-weighted renewal. Renewal terms deserve the same scrutiny: many agreements condition renewal on refurbishment to current brand standard or re-signing on the then-current, often less favourable, terms. And the lease must run with the agreement. A ten-year franchise term sitting on a lease with three years remaining and no option is a three-year business unless the file can evidence otherwise. Where the franchisor holds the head lease and licenses occupancy to the franchisee, tenure security depends on the franchisor's own position with the landlord — the working file documents which structure applies and what it does to the supportable range.

Franchisor consent, training fees and the disclosure document

No franchise changes hands without the franchisor's consent, and the consent process is a real deal friction: incoming franchisees are assessed and trained at their own cost, transfer and documentation fees apply, and the franchisor may require the outgoing franchisee to remedy defaults or complete overdue refurbishment before approving the transfer. Some agreements add a first right of refusal, which thins the buyer pool. Each friction affects what a willing but not anxious purchaser — the Spencer v Commonwealth standard underpinning Australian market value — would actually pay, and the valuation prices it rather than assuming a clean sale. The disclosure document required under the Franchising Code of Conduct, remade with effect from 1 April 2025, is an underused evidence source: it carries the fee schedule, territory terms and, under the current Code, significant capital expenditure disclosure, all of which can be tested against the subject's actual figures.

Royalties, levies and refurbishment cycles in maintainable earnings

Royalties and marketing levies are a permanent margin drag, not a cost a buyer can negotiate away, so maintainable earnings are struck after them — which is why a franchised unit typically earns less per revenue dollar than an equivalent independent business, and why cross-applying independent-business multiples overstates value. Mandatory supply arrangements and technology fees sit in the cost base and are normalised only where evidence supports it. Refurbishment obligations on set cycles are the quieter trap: they are committed cash outflows, commonly tied to renewal or fixed intervals, and the file either provides for the cycle within maintainable earnings or deducts the present value of committed capex from the concluded value — and states which approach it took. Royalty and levy statements reconciled to point-of-sale reported turnover give the earnings base an audit trail a buyer's accountant can verify.

Resale prices, greenfield costs and what territory is worth

The gap between what an existing unit resells for and what the franchisor charges to establish a greenfield site is the clearest market evidence of transferable goodwill in a system. Where resales within the network consistently price above establishment cost, the premium reflects proven trading, a trained team and an established customer base; where they do not, goodwill beyond fit-out is difficult to defend. Comparable resales inside the same system are usually the best evidence available, and the working file records them where they can be obtained. Territory rights are part of the same contractual bundle: genuine exclusivity supports the multiple, while non-exclusive territories, online-sales carve-outs that let the franchisor sell direct into the catchment, or a company-owned store nearby all erode it. The report values the territory as it is actually drafted, not as the brochure describes it.

Valuing the franchisor system is a different engagement

For founders, the question is not what one unit is worth but what the system is worth — and the value drivers invert. The franchisor's earnings are the royalty and levy streams across the network, initial and renewal fees, and any supply-chain margin, generated by the brand and intellectual property the system licenses out. The analysis works through network unit economics, franchisee churn and renewal rates, the pipeline of new grants, the sustainability of the royalty rate against franchisee profitability, and compliance exposure under the Franchising Code, which carries civil penalties. Methodology is typically a capitalisation or discounted cash flow of the royalty stream with a relief-from-royalty cross-check on the brand. These engagements support capital raises, system sales and founder restructures, and they are scoped separately from franchisee valuations because the evidence base is entirely different.

Which Prismi tier fits a franchise valuation

A single-site franchisee with clean records and a straightforward purpose — an internal transfer benchmark or a partner buy-in — is usually well served by Essential, from $1,495 + GST in 10–14 business days. Most franchise resales, family transfers and small business CGT concession claims sit in Comprehensive, from $3,995 + GST in 15–25 business days, which gives the agreement, lease and disclosure document the documented analysis a reviewer expects. Where the valuation must withstand a dispute, a multi-unit consolidation or ATO review — or where the subject is the franchisor system itself — the Defensible Valuation File, from $8,995 + GST in 25–35 business days, builds the full evidence trail, senior-reviewer signed with the working file retained for ten years. Founders weighing exit timing can engage the Valuation Range & Scenario Review. Retrospective dates attract a $495 surcharge per historical date, additional entities are $750 each, and fees are fixed at engagement — never contingent on the outcome.