The short answer
A franchisee's business, sold on resale, is typically priced as a multiple of normalised EBITDA, struck after the royalties, marketing contributions and other payments the franchisor charges and after a market wage for whoever runs the unit. Published broker and adviser commentary commonly puts that multiple at roughly 2 to 4 times EBITDA. Read the range as commentary, not data: it reflects brokers' observations rather than settled prices, and Australian finance commentary notes there is no comprehensive public database of small-business transaction multiples. The contract matters more than the brand. A franchisee trades under the franchisor's brand for a fixed term, and the independent review of the Franchising Code of Conduct (December 2023) reported that Franchise Disclosure Register data indicated over 80 per cent of franchise agreements explicitly exclude franchisee goodwill. The buyer is therefore paying for the right to run the unit for the years left in the agreement, plus whatever renewal the franchisor will actually grant. A unit with eight years left, a matching lease and no refit due can sit at the top of the range, and an otherwise identical unit with two years left, a discretionary renewal and a mandated refit at the bottom. The price is also not final at signing: the franchisor's consent is required, and the incoming franchisee has a cooling-off period of up to 14 days.
What the buyer is really paying for: the term, renewal and the Franchising Code
The Franchising Code of Conduct, a mandatory industry code under the Competition and Consumer Act 2010, commenced in its current form on 1 April 2025, with some rules applying from 1 November 2025. It applies to any franchise agreement entered into, transferred, renewed or extended on or after 1 April 2025, so selling a unit on an older agreement brings the transfer under it. The Code gives a franchisee no automatic right to goodwill or to renewal. It requires disclosure instead: whether there is a renewal option, what rights the franchisee has to any goodwill it generates (with a statement to that effect if there are none) and whether there is a restraint of trade clause. Where there is no renewal option, the prescribed wording says the franchisor may, but does not have to, extend the term, and if it does not, the agreement ends and the franchisee no longer has a right to carry on the business (Schedule 1, item 18). The franchisor must tell the franchisee in writing at least six months before the term ends whether it will extend, enter a new agreement or do neither (section 36), so a valuation has to weigh renewal, not assume it. For agreements entered into, transferred, renewed or extended from 1 November 2025, the Code also requires the agreement to provide for compensation for early termination if the franchisor withdraws from the Australian market, rationalises its network or changes its distribution model (section 43), and a reasonable opportunity to make a return, during the term, on the investment the franchisor requires (section 44). Those protections reduce tail risk but do not pay for years beyond the term, so a buyer prices the unit as a finite stream of earnings.
Royalties, levies and the evidence a buyer asks for
Royalties, marketing and technology fund contributions and franchisor-set supply pricing are permanent costs. The valuer tests that normalised EBITDA carries each at the rate the buyer will pay, not the rate the seller paid, so a scheduled step-up in a contribution belongs in the maintainable figure. The disclosure document must describe each recurring payment and how it is calculated (Schedule 1, item 14), say whether the franchisor receives rebates from suppliers to franchisees (item 10), and describe any specific purpose fund, such as a marketing fund, with the franchisee's contribution and the latest annual statement (item 15). Those funds must be held in a separate account and their annual statements audited, unless 75 per cent of contributing franchisees vote that an audit is unnecessary. The evidence that does the work:
- ·The franchise agreement and variations: remaining term, renewal and extension rights, end-of-term and goodwill provisions, restraint of trade clause, any right of first refusal for the franchisor
- ·The franchisor's counts of transfers, closures, terminations, non-extensions and buy-backs over the last three financial years (Schedule 1, item 6), which show whether units resell or are recovered
- ·Territory terms: exclusive or not, whether others may open nearby, and the rules on online sales (items 9 and 12)
- ·Three years of every royalty, fee, levy and fund contribution paid, reconciled to the profit and loss statement, plus any scheduled change
- ·Supplier requirements and rebates, with mandated pricing tested against market where possible
- ·Any earnings information the franchisor has given the seller or buyer, and its basis
Retail, service, multi-unit and master franchises price differently
Hospitality and retail units trade from leased premises with staff, a franchisor-specified fit-out and periodic refurbishment, so their value is most exposed to the lease, the capital cycle and the owner's own wage, usually the largest normalisation adjustment. Service, mobile and home-based franchises carry little premises or fit-out risk, but their earnings can depend on the owner's personal work and, where the franchisor supplies the leads or sets the prices, on terms the franchisor can change; the valuer asks how much work comes through the system and what the agreement says about pricing and territory. A multi-unit operator is priced unit by unit first, because each has its own term, lease and refit date, then as a group, where the franchisor's consent to a bundled sale and management depth matter. A master franchise or area developer is a different asset again: the value sits in the right to appoint sub-franchisees and the royalty stream beneath it, which the Code's disclosure rules treat separately (Schedule 1, item 7). Long agreements, modest capital intensity and earnings that survive a change of owner sit toward the upper part of the 2 to 4 times commentary range, and short agreements, heavy capital commitments and owner-dependent earnings toward the lower.
Franchisor consent, transfer fees and cooling off
The Code sets the process for a sale. The request must be in writing with the information the franchisor would reasonably require (section 48). The franchisor must say in writing whether it consents, give reasons if it does not and state any conditions, and it must not unreasonably withhold consent (section 49). The Code lists circumstances in which refusal is reasonable, including a buyer unlikely to meet the financial obligations under the agreement or outside the franchisor's selection criteria, and a seller who owes the franchisor money without reasonable provision to pay or has not remedied a breach (section 49(6)). If the franchisor does not refuse in writing within 42 days, consent is taken to have been given. Once the transfer takes effect, the new franchisee may terminate within a cooling-off period of up to 14 days (section 52, or section 50 where the buyer signs a new agreement), so the seller's proceeds can carry a refund risk until it ends. These sections do not deal with transfer fees. The ACCC says an assignment fee may be payable, and published legal commentary describes it as a fixed amount or a percentage of the sale price, often with training and legal costs added, allocated by negotiation. For valuation, these are transaction costs for the net-proceeds calculation, not deductions from business value. What does belong in the value is what the buyer will actually sign: a transfer can involve a new franchise agreement, and the franchisor must disclose whether it will amend the agreement on or before transfer (Schedule 1, item 19). A unit that passes onto the franchisor's current form, with a different term, fees or territory, is valued on those terms.
The standing deductions: lease and franchisor-required capital expenditure
Two deductions arise in almost every franchise resale. The first is the lease. Its remaining term and options must line up with the franchise agreement: a buyer with six years left on the agreement and two on the lease holds a risk, not an asset. Where the franchisor or an associate holds the head lease and sub-leases the premises, the franchisor must give the prospective buyer a copy of the head lease or, if it does not have the lease in its possession, a summary of the commercial terms negotiated with the landlord, including any lease incentives (sections 23 and 24), and the rent review, make-good and assignment terms are read from it. The second is capital expenditure the franchisor can require. A franchisor may require significant capital expenditure only if it was disclosed in a disclosure document given before the agreement was entered into, renewed or extended, is to be incurred by all or most franchisees and approved by a majority of them, is needed to comply with legislation, or has been agreed by the franchisee (section 60). A knowledgeable buyer prices a disclosed refit or rebrand falling due soon after purchase as a deduction from the price, whatever the depreciation schedule says, and equipment near the end of its life that system standards will force the buyer to replace is treated the same way.
A worked example: one unit, four years left
Consider a hypothetical single-unit franchise with annual sales of $1,400,000, four years left on the agreement and a renewal at the franchisor's discretion. Every figure is invented for illustration and is not a benchmark. Reported EBITDA, after royalties and the marketing fund contribution, is $310,000, but the owner works full-time as manager and draws no wage. Charging a market manager's wage of $95,000 including superannuation gives $215,000, and adding back $5,000 of genuinely personal expenses gives $220,000. The agreement steps the marketing fund contribution up by 1.0 per cent of sales, which is $14,000 a year, so normalised EBITDA is $206,000. Because the term is short and renewal is uncertain, the valuer assumes a multiple of 2.0 to 2.5 times for illustration, at the lower end of the broker-commentary range of roughly 2 to 4 times. That gives $412,000 to $515,000 before deductions. The franchisor's current disclosure document lists a refit of $150,000 due in eighteen months, which a knowledgeable buyer deducts, leaving a supportable range of $262,000 to $365,000. The franchisor's transfer fee and the parties' legal costs are not deducted: the seller and buyer allocate them between themselves. The multiple was set by the remaining term and renewal risk, not the brand.
What a defensible franchise valuation file contains
The conclusion is a supportable range with a reasoned position inside it, and the file behind it typically contains:
- ·Three to five years of financial statements plus year-to-date trading, reconciled to the bank and, where available, the franchisor's sales reporting
- ·A normalisation schedule with evidence for each adjustment, above all the market wage for whoever will run the unit and each royalty, levy and contribution at the buyer's rate
- ·The franchise agreement and variations, the franchisor's current disclosure document and its Franchise Disclosure Register profile
- ·The franchisor's consent correspondence and conditions, and any new agreement or amendment the buyer will be asked to sign
- ·The lease in full, or the head lease and sub-lease terms: tenure, options, rent review, assignment and make-good
- ·Disclosed and anticipated capital expenditure with amounts and timing, and an equipment register with ages and condition
- ·Evidence on the system and territory: transfers, closures and terminations over three years, and any nearby openings the franchisor plans
- ·Comparable franchise resales with settled prices where obtainable, with sensitivity analysis across the supportable range
When the number has consequences
A formal valuation is worth commissioning once the number has consequences someone else can test: preparing a unit for sale, where the price must survive a buyer's diligence and the franchisor's consent process; buying into a system; a partner or shareholder exit; property settlement negotiations; and tax events, including small business CGT concession claims under Division 152 of the ITAA 1997, where eligibility can turn on documented market values and the $6 million maximum net asset value test. The standard applied is market value, the price a knowledgeable, willing but not anxious buyer and seller would agree, from Spencer v Commonwealth (1907) and reflected in the ATO's 'Market valuation for tax purposes' guidance. Oliver Group prepares independent valuations only. We are not a tax agent and do not give tax, legal or financial advice: whether a franchisor is unreasonably withholding consent, what an agreement allows and how a sale is taxed are questions for your franchise lawyer and accountant. Oliver Group's reports follow the guidelines of APES 225 Valuation Services. Oliver Group's fees are set by the annual turnover of the business: a Small Business Valuation is $1,495 + GST for turnover under $2 million, a Medium Business Valuation is $2,495 + GST for turnover between $2 million and $10 million, and a Large Business / Start-Up Valuation is $3,495 + GST for turnover over $10 million or for a start-up. A small-business draft is delivered in 2 business days and a medium-business draft in 3 business days; the delivery date for a Large Business / Start-Up Valuation is agreed before commencement. Delivery time starts once payment and all required information have been received. The fee is fixed in writing before work begins and never depends on the concluded value.