When most people think about buying a franchise, they picture signing up with a franchisor, paying the initial franchise fee, and building a new location from the ground up. But there is a second and often overlooked path into franchise ownership: buying an existing franchise location from its current owner. These are called franchise resales, and for the right buyer they offer advantages that a new franchise unit simply cannot match.
A franchise resale occurs when an existing franchisee sells their operating location to a new buyer. The buyer acquires the business — the equipment, the lease, the staff, the customer base, and the operating systems — and then seeks approval from the franchisor to be recognized as the new franchisee for that location.
The distinction from buying a new franchise is significant. With a new unit, you are building from zero. With a resale, you are acquiring a business that is already operating, already generating revenue, and already known in the community. You step into an income stream on day one rather than spending months building out a space and waiting for customers to find you.
Understanding why a location is for sale is one of the first questions any franchise resale buyer should ask. The reasons vary widely and significantly affect how you should approach the deal.
Retirement is the most common and the cleanest reason. An owner who built a successful location over 15 years and is now ready to exit typically has a well-run business with stable performance. These are often the best resale opportunities available.
Relocation is another clean reason. A franchisee moving out of the market who needs to sell their unit is not selling because the business is struggling — they are selling because life circumstances require it.
Health issues, partnership dissolutions, and burnout also produce resale opportunities that may have nothing to do with the business's performance.
More concerning reasons include underperformance, conflict with the franchisor, or market conditions that have made the location less viable. These do not mean the business is not worth buying — but they require more scrutiny and honest assessment before you commit.
Buying a franchise resale is not simply a transaction between buyer and seller. The franchisor must approve the transfer. The approval process typically involves a background check and financial review of the buyer, an interview or assessment process, and completion of the franchisor's training program. Some franchisors charge a transfer fee, which is disclosed in the FDD.
The franchisor's consent to the transfer is non-negotiable — without it, you cannot operate under the brand. This means you need to engage with the franchisor early in the process, understand their buyer criteria, and confirm you meet them before investing significant time and money in due diligence. Also understand the remaining term on the franchise agreement. If the current franchisee has three years left on their agreement, you may inherit only three years of operating rights before you need to negotiate a renewal — on whatever terms the franchisor offers at that time. A longer remaining term or a new franchise agreement issued at closing is a more favorable structure for the buyer.
The financial due diligence for a franchise resale is essentially the same as for any business acquisition, with a few additional layers specific to the franchise context.
Start with the same core documents: three years of tax returns and profit and loss statements, a current balance sheet, and reconciliation of financial data against point-of-sale reports and bank statements. Verify that what the seller is representing as earnings actually appears in the documented financial record.
Then go deeper into franchise-specific financials. Review the royalty and marketing fee payment history — are they current or in arrears? Arrears with the franchisor can create complications that surface at transfer and need to be resolved before closing. Review any outstanding violations or notices from the franchisor regarding brand standards, operational compliance, or reporting requirements.
Request the location's performance data relative to the system average. Franchisors often track same-store sales, average ticket, and customer frequency across their network. A location that consistently underperforms the system average without a clear explanation is a warning sign. A location that outperforms is a signal of a strong operator and a favorable market.
For most brick-and-mortar franchise locations, the lease is a critical asset. You are not just acquiring the business — you are acquiring the right to occupy that specific space, and the value of the business is largely tied to the location.
Review the lease carefully for remaining term, renewal options, assignability, and whether the landlord must consent to the transfer. Most commercial leases require landlord consent for any assignment, and the landlord's willingness to recognize you as the new tenant is a prerequisite for closing. Start the landlord conversation early — it can take time and occasionally creates complications that need to be resolved before you can close.
Franchise resales are valued similarly to independent businesses — primarily on seller's discretionary earnings with a multiple applied based on business quality, location, remaining franchise term, and system health. The multiple for a franchise resale may be slightly higher than for an independent business of similar earnings because buyers are paying for the brand, the system, and the support infrastructure in addition to the business itself.
Compare the asking price against what existing franchisees are actually earning per Item 19 of the FDD, and against what a new unit in a comparable market would cost to build out. If the resale is priced significantly above what you could build a new unit for, the premium needs to be justified by the existing cash flow, the established customer base, and the time and risk saved by not starting from zero.
Franchise resales are SBA-eligible acquisitions when the business has documented financial history and adequate cash flow. SBA lenders have a Franchise Registry that tracks approved franchise brands — if the brand is on the registry, the loan processing is often faster because the franchisor's agreements have already been reviewed. Confirm that the specific franchise brand is SBA-eligible before building your financing plan around it.
Note that as of October 1, 2026, SBA loans of $3 million or more require a quality of earnings report. At Jon Tennant Real Estate and Business Brokerage, operating under Midtown Mergers and Acquisitions, we work with buyers evaluating franchise resales and independent business acquisitions across North Carolina. Reach out for a confidential conversation.
Looking for the warning signs before you commit? Read 8 Red Flags When Buying a Franchise in North Carolina
Evaluating a franchise resale or another business acquisition in North Carolina? Reach out for a confidential conversation.
Contact JonBuying a franchise resale in North Carolina
Business Buying
No Item 19, unreachable franchisees, weak unit economics, and other warning signs to catch early.
Business Buying
Financial, legal, operational, license, and lease due diligence — the complete checklist.
SBA Financing
Down payments, DSCR, the new Quality of Earnings rule, seller financing, and the full process.