Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / Franchise Exit Strategies That Can Double Your Sale Price
Transcript
- Lucas: The average franchise owner spends years building their business, but when it comes time to sell, they often leave a lot of money on the table. A recent survey of franchise business brokers found that only about 30 percent of franchise resales actually hit the seller's initial asking price. Luna: That's a tough stat. And I've heard the multiple on EBITDA can swing wildly — from two times for a messy operation to five times for a well-prepared one. What separates them? Lucas: Yeah, exactly. And honestly, if this episode helps you get even a half-turn higher multiple on your eventual sale, that could be worth tens of thousands of dollars. If that feels like it was worth a coffee to you, we've got a link — buy me a coffee dot com slash fexingo. No pressure, just a simple way to keep these conversations ad-free and focused on what matters. Luna: Absolutely. We love doing this, and listener support makes it possible. So let's dig into the biggest mistake we see franchisees make when preparing for an exit. Lucas: Right. So first up — and this is the one that surprises people — is cleaning up the franchise relationship itself. Many owners neglect the franchisor relationship in the years before a sale. They let small compliance issues slide, maybe a signage update they didn't make or a training requirement they skipped. Luna: And those become red flags for buyers. A smart buyer's due diligence will include a call to the franchisor. If the franchisor has a lukewarm relationship with the seller, that can kill the deal or lower the price. Lucas: Exactly. I talked to a broker who handled a sale for a multi-unit QSR franchisee in the Midwest. The owner had two unresolved disputes with the franchisor — one over a territory encroachment and one over a delayed remodel. Those two issues knocked about half a turn off the multiple. The seller ended up settling both before listing, and the final price jumped from three to four and a half times EBITDA. Luna: That's a concrete example. So step one: resolve any outstanding issues with the franchisor, get your franchise agreement renewed if it's near expiration, and make sure you're in full compliance. Lucas: Right. And step two is about the financials. Most franchisees run their books on a cash basis for tax efficiency, but buyers and lenders want to see accrual-based financials that show the true profitability of the business. That means adjusting for things like prepaid expenses, accounts receivable, and deferred revenue. Luna: And also adjusting the owner's salary. A lot of franchisees pay themselves through a combination of salary, distributions, and perks. A buyer will add back excessive owner compensation to get a normalized EBITDA. Lucas: Yeah, exactly. The rule of thumb is to run your business for at least two years as if you were going to sell it. That means showing a clean, consistent profit and loss statement with all discretionary expenses clearly documented. One franchisee I know actually switched to an accrual system two years before listing and saw his EBITDA increase by 15 percent just from proper timing of expenses. Luna: Smart. And that directly boosts the sale price. So let's talk about timing — when is the best time to sell a franchise? Lucas: You want to sell when the franchise brand is strong and when the unit-level economics are trending upward. If the franchisor is launching a new product line or a national advertising campaign that's driving traffic, that's a tailwind. You also want to avoid selling right after a big capital expenditure cycle, because the buyer will see lower cash flow from the investment. Luna: So sell after the investment has started to pay off but before the next big remodel cycle. And what about market conditions? Are we in a seller's market right now? Lucas: As of mid-2026, we're seeing a wave of baby boomer franchisees retiring, so there's a lot of inventory. But there's also strong demand from first-time franchise buyers and private equity groups looking to roll up platforms. So it's a balanced market. The key is to differentiate your business. That's where step four comes in: working with a specialized franchise broker. Luna: Because not all business brokers understand franchise transfers. Franchise sales require franchisor approval, transfer fees, and often a training period for the buyer. A generic broker might miss those steps. Lucas: Right. A good franchise broker has relationships with the franchisor's development team and can pre-qualify buyers. They know what the franchisor is looking for in a new franchisee. I've seen cases where a broker helped a seller get a higher price by positioning the business as a 'turnkey opportunity' for an existing franchisee looking to expand into a new market. Luna: So it's not just about finding any buyer — it's about finding the right buyer who the franchisor will approve quickly. That saves time and reduces the risk of the deal falling through. Lucas: Exactly. And one more thing that often gets overlooked: the lease. If you own the real estate separately, that's an asset you can sell or lease to the buyer. But if you have a favorable lease with below-market rent, that's a huge selling point. Make sure your lease is assignable and has enough term left. A lease with ten years remaining is worth a lot more than one with two years. Luna: Great point. So to summarize: resolve franchise issues, clean up financials, time the market right, use a specialized broker, and secure your lease. Any one of these can add a turn to your multiple. Lucas: Yeah, and taken together, they can turn a two-times EBITDA business into a five-times one. That's the difference between walking away with a million dollars and two and a half million. It's worth the effort. Luna: Absolutely. Next time you're thinking about your exit, start early. Even two or three years of preparation can pay off big.