Franchise businesses earn a higher resale price when compared with non-franchise businesses, reported a trio of researchers at the University’s Marshall E. Rinker Sr. School of Business.
“Our research supports the value of a franchise branded business,” explained Dr. John P. Hayes, director of PBA’s Titus Center for Franchising. “If two people operate the same type of business over a period of years and enjoy similar sales, the franchise business is more likely to sell at a higher price point. Business owners ought to be aware of that information in advance of launching a business.”
Hayes, CFE; David Smith; and Mary Kay Copeland, all members of the Rinker School of Business faculty, prepared a peer-reviewed study “Determinants Impacting Resale Premium Disparity when Selling a Small Business: A Predictive Non-Linear Approach.” It will be published in the Fall 2021 issue of the Journal of Business and Economic Studies.
After examining 2,159 business resales over a 10-year period, the researchers found that franchise businesses sold at a 1.5 times higher price than non-franchise businesses.
The study also found that small food and restaurant businesses (non-grocery) sell at a .5 times higher price than other personal and professional small businesses, regardless of whether or not they were franchises.
“There have been numerous studies about small business development and drivers for success in business,” Hayes said. “but not much research that examines small business resales. With the aging of franchising comes more resales of franchise businesses, and so we decided to look at that topic specifically. Our research focused on the variables that may have a positive impact on the value of a small business resale.”
Photo: Titus Center for Franchising Director John P. Hayes makes a presentation at the Titus Center's advisory board meeting in April 2021.