Is buying a franchise resale cheaper than starting a new franchise?

Not necessarily. A well-performing franchise resale often sells for more than the cost of building a new location because you are paying for proven cash flow and an established customer base. However, a struggling location may sell for less than startup cost, which can be a bargain if you can identify and fix the problems. Always compare the total acquisition cost to the cost of a new build.

Do I need the franchisor's permission to buy a franchise resale?

Yes. Every legitimate franchise system requires franchisor approval before a franchise can be transferred to a new owner. You will need to meet the brand's financial and experiential qualifications, go through an application process, and sometimes complete training before the transfer is approved. The franchisor may also have a right of first refusal.

What is a transfer fee in franchising?

A transfer fee is a one-time payment to the franchisor when a franchise location changes ownership. It covers the franchisor's administrative costs for reviewing the new buyer, updating agreements, and providing onboarding or training. Transfer fees typically range from $5,000 to $25,000 but can be higher for premium brands.

How do I find franchise resales for sale?

Franchise resales are listed through business brokers, franchise resale marketplaces, and sometimes directly through the franchisor. Many franchisors maintain internal lists of locations available for resale and can connect interested buyers with motivated sellers. Working with a broker who specializes in franchise resales can streamline the search process.

What happens to the existing employees when a franchise is resold?

In most cases, the existing staff stays on under the new owner. Franchise employees are typically employed by the franchisee, not the franchisor, so the new owner inherits the existing team. However, you are not legally obligated to retain all employees. A smooth ownership transition usually involves keeping key staff to maintain continuity and customer relationships.

What Is a Franchise Resale? | Zoom Room Franchise

What Is a Franchise Resale?

A franchise resale happens when an existing franchisee sells their business to a new owner. Instead of signing a new franchise agreement and building a location from the ground up, you purchase an operating unit with an existing customer base, trained staff, and a track record of financial performance.

Franchise resales happen for many reasons. The current owner may be retiring, relocating, or simply ready to move on to something new. In some cases, a franchisee may be underperforming and looking to exit. Understanding the seller's motivation is one of the first things you should investigate.

Every franchisor has a transfer process that must be followed. You cannot just buy a franchise the way you would buy an independent business. The franchisor has the right to approve or reject the buyer, and specific conditions must be met before the sale can go through.

Resale vs. New Build: Pros and Cons

Advantages of buying a resale:

You get immediate cash flow from day one. The location is built out, the staff is trained, and customers already know the business exists. You skip the construction timeline, the grand opening uncertainty, and the slow ramp-up period that every new location faces.

You also get real financial data. Unlike a new build where you are projecting performance based on the franchisor's estimates, a resale gives you actual revenue and expense numbers you can analyze.

Disadvantages of buying a resale:

You inherit the previous owner's reputation, for better or worse. If the location has poor reviews, a disengaged staff, or deferred maintenance, fixing those problems takes time and money. You may also inherit an unfavorable lease or outdated equipment that needs replacement.

The purchase price of a resale can also be higher than the cost of a new build if the location is performing well. You are paying a premium for the reduced risk and immediate income.

How Franchise Resale Value Is Calculated

Franchise resale values are typically based on a multiple of earnings, most commonly a multiple of the seller's discretionary earnings (SDE) or EBITDA. The multiple varies by industry, brand strength, location quality, and local market conditions.

Factors that increase resale value include strong and growing revenue, a favorable lease with renewal options, a well-maintained facility, a solid team in place, and a location in a high-demand market.

Factors that decrease resale value include declining revenue, a short remaining lease term, deferred maintenance, high staff turnover, and poor online reviews.

Always get a professional business valuation before making an offer. The seller's asking price is a starting point, not the final word. Review at least three years of financial statements, tax returns, and the operations manual compliance records.

Transfer Fees and Franchisor Approval

Most franchise systems charge a transfer fee when a franchise changes hands. This fee covers the franchisor's costs for reviewing the buyer's application, providing initial training, and updating legal documents. Transfer fees typically range from $5,000 to $25,000 or more, depending on the brand.

The franchisor also has the right to approve or reject the prospective buyer. You will need to meet the same financial and experiential qualifications as any new franchisee. Expect to go through a formal application process, submit financial statements, and possibly complete an interview or discovery day.

Some franchisors also have a right of first refusal, meaning they can choose to buy the franchise themselves at the agreed-upon price before allowing the sale to a third party. This is standard language in many franchise agreements, so do not be surprised if you encounter it.

Due Diligence Checklist for Franchise Resales

Before you commit to buying a franchise resale, work through this due diligence checklist:

Financial review. Examine at least three years of profit and loss statements, tax returns, and bank statements. Look for trends, not just current numbers.

Lease review. How much time is left on the lease? What are the renewal terms? Can the lease be assigned to you? A short remaining lease with no renewal option is a serious risk.

Franchise agreement review. Read the existing franchise agreement and understand what terms will carry over versus what the franchisor will renegotiate. You may be required to sign a new agreement at current terms.

Customer and reputation analysis. Check online reviews, social media presence, and customer feedback. Talk to regulars if you can.

Staff assessment. Meet key employees. Understand compensation, tenure, and morale. Losing critical staff during a transition can hurt performance.

Hire a franchise attorney and a CPA with franchise experience. The cost of professional advice is minimal compared to the risk of buying a problem you did not see coming. Understanding the full franchise process will help you navigate this evaluation.

Franchise Resales: Buying an Existing Location vs. Starting Fresh