How do I determine the resale value of a Curves franchise?
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I'm interested in purchasing an existing Curves franchise that is being sold. I've looked at her financials, and I'm not sure what the resale value of the franchise is. She's not pulling in much money after all the bills are paid, but there is tremendous potential she hasn't tapped into yet. Her territory is very large, and she doesn't market. I'm told that she will accept lower than her asking price, but I'm not sure how to figure out what I should offer.
Determining the resale value of any franchise is part art and part science. There are a number of standard valuation techniques that you can research and use, ranging from the book value of the assets to a discounted value of the projected cash flows. In most cases, the easiest method to use may well be a simple multiple of the cash the business produced over the past 12 months.
Even if you use that method, there is quite a range in multiples depending on the trend data, the size of the business, and the upside potential you believe the business has. Given the fact that you have the financials already, my advice would be to hire an experienced business broker on a fee basis to run valuation numbers (all business brokers have programs to do this) so that you can get hard figures on each of a number of alternatives and then decide which you think is most appropriate. This shouldn't take the broker more than an hour or two to complete.
As a final thought, you might also ask the broker if they have any other businesses that they think might be interesting to you. You never can tell what else might be available and it would give you more negotiating leverage with the Curves seller if they feel you've got other options.