Assuming your franchise business has the qualities that enable it to be sold for value, two questions still need to be addressed, which are:
Do you own the business?
Are you entitled to sell it for value?
The answers to these questions will depend primarily on the terms of the franchise or licence agreement under which you trade and the exit policy that your principal has adopted. (Please note we will use the word ‘principal’ here to cover the principals of licensees, or franchisees or selfemployed agents.) In the case of most franchise agreements, ownership per se is not an issue.
It is usually clear that the franchisee owns the franchise business. The exit questions that arise are how, and to whom, is the franchisee able to dispose of his businesses when, and if, he wishes to do so?
You will need to assemble the following information when you are preparing an opinion as to the value of your business. Professional valuers will, as a minimum, also require this information to provide you with a formal valuation.
It is clear from the responses of business owners that most consider wealth creation and independence to be their primary objectives. But, it is worth asking whether these objectives are achieved more easily through owning a business than they could be through working for someone else. Similarly, will you, as head of the family, create more wealth for your family by going into business than you could by being employed?
The third conclusion is that most owners have an unrealistic idea of business values and have no firm plans to build the business to reach the target value they have hoped to achieve. Does this also apply to you? Have you based your answers on an up-to-date, formal valuation provided by a professional valuer, or your own estimates? If you have used your own estimates, what valuation methods have you used?