By Anne Fisher - CNNMoney:
Question: About 4 years ago I bought a franchise territory that gives me exclusive rights in 3 local counties. The business does decorative coatings on concrete buildings. I paid about $20,000 for all 3 counties but have developed only one, which has been very profitable. If I were to sell the other 2, how much should I ask for them? Should the price be based on what I paid, or should it reflect their earnings potential (a much higher figure, assuming the buyer puts in the effort I have on the one I’m keeping)? - Mark Simmons Franchisee, Concrete Technology Verona, Va.
Answer: Dear Mark: As with most franchising issues, you must first study the franchise agreement you signed upon buying the territory. ‘Does it let you transfer the two counties?’ asks Terry Powell, CEO of Entrepreneurs’ Source, a consulting firm based in Southbury, Conn., that advises franchisees. ‘Some agreements state that you can’t divide the territory.’
If it turns out that you can transfer your rights in two of the 3 counties, Powell says, ’see what it would cost today to buy, from the franchisor, a territory about equal demographically to the 2 you want to transfer.’ He notes that four years ago you paid about $6,700 a county. ‘Let’s say the franchisor is now charging new franchisees $12,000 for the rights to a like county. That’s roughly what you could charge,’ says Powell.
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