How to Buy a Franchise in 2026

Most people think buying a franchise means starting from scratch — signing a franchise agreement, finding a location, building out a space, and grinding through the first two years of startup losses. That's one way. The smarter way, in most cases, is buying an existing franchise resale: a location that's already operating, already generating revenue, and already has a customer base.

I've advised buyers on franchise resale acquisitions across dozens of brands — from quick-service restaurants to fitness studios to home services. The economics of buying an existing unit versus starting new are dramatically different, and the due diligence process has unique wrinkles that first-time franchise buyers consistently miss. Let me walk you through it.

Why Buy an Existing Franchise Instead of Starting New

The numbers tell the story. A new franchise unit in most systems takes 12-24 months to reach breakeven. During that time, you're burning cash — paying rent, labor, royalties, and marketing with minimal revenue. Total investment for a new QSR franchise runs $350K-$1.5M depending on the brand, and you might not see positive cash flow for two years.

An existing franchise resale, by contrast, has a proven revenue stream. You can analyze actual P&Ls, not projections. You inherit trained staff, existing customers, and a location with a track record. Yes, you pay a premium over the startup cost — that's the value of eliminating startup risk. For a deeper look at how franchise businesses are valued, see our franchise valuation guide.

What Franchise Resales Actually Sell For

Franchise resale valuations vary enormously by brand, unit economics, and territory. Our data shows these general ranges:

• Quick-service restaurants (McDonald's, Chick-fil-A, Subway): 2.5-4.5x SDE or 0.3-0.6x revenue. Multi-unit packages (3+ locations) command premiums of 20-40% over single-unit pricing.
• Home services franchises (ServPro, Paul Davis, Two Maids): 2.0-3.5x SDE. Lower capital intensity drives higher SDE margins and stronger buyer interest.
• Fitness franchises (Orangetheory, F45, Planet Fitness): 3.0-5.0x SDE or 0.8-1.2x revenue for units with strong membership bases. Distressed units (post-COVID buildback) trade at 1.0-2.0x SDE.
• Automotive services (Jiffy Lube, Meineke, Midas): 2.5-3.5x SDE. Stable, predictable, but limited growth upside drives moderate multiples.

A critical nuance: franchise resales often trade below independent business multiples in the same industry because of the ongoing royalty and advertising fund obligations (typically 6-10% of gross revenue combined). That royalty drag permanently reduces the cash flow available to the owner.

The FDD: Your Most Important Due Diligence Document

The Franchise Disclosure Document is a federally mandated filing that every franchisor must provide. It's 200-400 pages of dense legalese, and most buyers barely skim it. That's a mistake that costs people hundreds of thousands of dollars.

Item 19 (Financial Performance Representations)is the most important section. Not all franchisors include it — and that silence should concern you. If the franchisor does provide Item 19, it shows system-wide revenue, cost of goods, and sometimes profitability data. Compare the unit you're buying against system averages. A unit performing below the 25th percentile is either in a bad location or poorly managed — either way, you need to understand why before you buy.

Item 7 (Estimated Initial Investment) tells you what it costs to open a new unit. This is your ceiling for a distressed resale — no rational buyer pays more for a struggling existing unit than it would cost to start fresh with a better location.

Items 5 and 6 (Fees)detail every ongoing obligation: royalties, advertising fund contributions, technology fees, required vendor purchases. Add these up. I've seen systems where total franchisor-mandated costs consume 12-15% of gross revenue before you pay a single employee.

Item 20 (System Size and Turnover)shows how many units opened, closed, and transferred in the last three years. High closure rates (more than 5% annually) or high turnover signal systemic problems. If franchisees are fleeing, there's a reason.

Franchisor Approval: The Variable You Don't Control

Here's the part that surprises first-time franchise buyers: even after you and the seller agree on price and terms, the franchisor has to approve the transfer. And they can say no.

Most franchise agreements give the franchisor a right of first refusal (ROFR) — they can match your deal and buy the unit themselves. Additionally, you'll need to meet the franchisor's financial and operational qualifications, often including minimum net worth ($250K-$1M depending on the brand), liquid capital requirements ($100K-$500K), and sometimes industry experience or completion of their training program.

Transfer fees are the hidden cost. Most franchisors charge $5K-$50K to approve a transfer, and this is non-negotiable. Factor it into your closing costs. Some franchisors also require the buyer to remodel the unit to current brand standards as a condition of transfer approval — that can add $50K-$200K in unexpected capital expenditure.

Deal Structure and Financing

SBA 7(a) loans are the primary financing vehicle for franchise resales. The SBA maintains a Franchise Directory of pre-approved brands, which streamlines the lending process significantly. Expect 10-year terms, 10-20% down, and rates around Prime + 2.75%. Lenders like ApplePie Capital specialize exclusively in franchise lending and understand unit-level economics better than generalist banks.

Seller financing is common in franchise resales, typically 10-20% of the purchase price on a 3-5 year note. Sellers are often motivated because the franchisor is pressuring underperforming owners to sell, and seller financing gets the deal done faster.

Equipment leases and assumed debt. Verify what equipment is owned versus leased. Commercial kitchen equipment, vehicles, and specialty tools often have existing lease obligations that transfer with the sale. Factor the remaining lease payments into your total cost of acquisition.

Transition Planning for Franchise Resales

The good news about franchise transitions: the brand does much of the heavy lifting. Customers come for the brand, not the owner. Unlike independent businesses, there's minimal customer attrition risk from an ownership change.

The risk is operational. You need to learn the systems, build relationships with staff, and get up to speed on the specific unit's quirks — vendor relationships, peak staffing needs, local marketing that works. Negotiate at least 2-4 weeks of transition support from the seller, ideally on-site.

Staffing is your biggest transition risk. In QSR and retail franchises, employee turnover is already high. An ownership change accelerates it. Identify your key employees — the shift managers, the head technician, the person who actually runs the place day-to-day — and lock them in. Retention bonuses of $2K-$10K for key employees who stay through the first 90 days are money well spent.

Common Buyer Mistakes

Buying the brand, not the unit.A McDonald's in Manhattan and a McDonald's in rural Oklahoma are wildly different businesses. Focus on the specific unit's financials, location demographics, lease terms, and competitive landscape. The brand gets customers in the door, but the unit's economics determine whether you make money.

Ignoring territory protections. Verify your territory exclusivity. Some franchise agreements allow the franchisor to place another unit within a mile of yours, or to sell through alternative channels (delivery apps, ghost kitchens) that compete directly with your location. If your territory protections are weak or nonexistent, factor that risk into your price.

Not talking to other franchisees. Item 20 of the FDD lists every current and former franchisee with contact information. Call at least 10-15 of them. Ask about franchisor support, actual profitability versus Item 19 claims, and whether they would buy into the system again. This is the most valuable due diligence you can do, and most buyers skip it entirely.

Underestimating the royalty drag on returns. When you model your returns, remember that 6-10% of every dollar goes to the franchisor in perpetuity. An independent business with $100K in SDE keeps all of it. A franchise generating the same top-line revenue might only produce $70K in SDE after royalties. Make sure your purchase price reflects franchise economics, not independent business economics.

The Bottom Line

Buying an existing franchise resale eliminates the biggest risk in business ownership — the startup phase. You're buying proven revenue, an established location, trained staff, and brand recognition. The tradeoffs are real: ongoing royalty obligations, limited operational autonomy, and franchisor approval requirements add complexity that independent businesses don't have. But for buyers who want a system, a playbook, and a brand behind them, a well-chosen franchise resale at the right price is one of the most reliable paths to business ownership. Do your homework on the FDD, validate the unit-level economics, and don't skip the franchisee reference calls.