With more than 700,000 franchised units in the Unites States, you may think that buying a franchise is an easy route to self-employment. The value of a franchise is a function of risk and return. But not all franchises are created equal, resulting in unique valuation challenges.
A franchised business may seem to carry less risk than an identical standalone business. Franchise brands are often well-established, and the franchisor provides administrative support. This support often includes marketing programs, accounting systems, operating manuals and training. The franchisor may also pass along volume purchasing discounts. Often, the brand recognition and support functions make a franchise seem significantly more valuable. However, that’s not always the case for a variety of reasons.
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