At some point you may decide to sell your franchise and ask the question:

“What is my business worth?”

While there is no single formula for valuing a business, Kiwikrane franchise areas tend to follow a relatively consistent valuation approach because they have similar operating costs and business models.

As a general guide, approximately 65% of machine income is consumed by operating costs such as prizes, site commissions, franchise fees, fuel, servicing, and other business expenses. This typically leaves around 35% as gross operating profit before allowing for owner drawings, tax, financing costs, and depreciation.

Many businesses are valued using a multiple of their annual earnings. A common benchmark for businesses of this nature is approximately three times annual earnings, meaning the purchaser is paying a price that could theoretically be recovered over approximately three years of trading.

Coincidentally, because the Kiwikrane business model typically retains around one-third of turnover after direct operating costs, a business’s annual turnover often provides a useful starting point for valuation. It is not an absolute fixed rule, but rather a good practical guide from which negotiations can begin.

The final value will then depend on a range of factors, including:

• The condition and age of the machines
• The quality and profitability of machine locations
• Weekly average turnover per machine
• The value and condition of stock
• The number of machines currently on profitable sites versus in storage
• If high value sites have been lost over the past year
• The overall presentation and condition of the business

As a general indication, franchise areas averaging more than $130 per machine per week will usually attract stronger buyer interest than areas averaging less than $80 per machine per week.

If a business has declined significantly and is no longer producing sustainable earnings, its value may instead be based primarily on the second-hand value of the machines and other physical assets.

The ideal outcome is that you operate your franchise successfully for many years, maintain and progressively upgrade your machines, and then sell the business for a price that reflects both its profitability and the quality of the assets.

Above all, be realistic. A well-managed, profitable business with quality sites deserves a premium. Equally, if the business has not been well maintained, the machine fleet has not been updates or performance has declined, prospective purchasers will expect this to be reflected in the sale price.

The Franchisor’s Role

The Support Office does not determine the selling price of your business, nor do we negotiate on behalf of either party.

Our role is to provide both the buyer and seller with objective information about how Kiwikrane franchise areas are typically valued. We want outgoing franchisees to receive a fair price for the business they have built, while also ensuring incoming franchisees purchase at a level that gives them every opportunity to succeed.

A successful transition benefits everyone—the outgoing franchisee, the incoming franchisee, and the long-term strength of the Kiwikrane franchise network.