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How to Evaluate a Franchise (Valuations, Tips to Follow, and More)

Two people discussing franchise valuations

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Whether you want a new career, a way to serve your community, or both, franchise ownership is a great way to achieve these goals.

Before becoming a franchise owner, it’s smart to do your research. With that in mind, some potential franchise owners want to know about franchise evaluations. Don’t worry – there’s no need to be an expert in business or finance.

In this post, 1Heart Caregiver Services will walk you through ways to fully evaluate a franchise. You’ll also discover how to perform a franchise valuation.

Two people discussing franchise valuations

Find Out Franchisee Fees

An important consideration for any potential franchisee involves finances. While all franchisees have expenses, no one wants to pay extravagant costs. So, find a franchise opportunity with relatively low entry costs compared to starting a business from scratch.

Because no two franchise opportunities are the same, each company has different franchisee expenses. You can learn exact franchisee-related costs by speaking with the franchisor. Understanding your expenses can help you determine if you’re financially ready to enter into a franchise agreement.

Research a Franchise’s Financials

Another critical step when evaluating a franchise is having a look at its financials. A company offering franchise opportunities should have this information. This crucial data can help you zoom out and look closer at the company behind a franchise.

One sign of an incredible franchise opportunity is seeing increasing revenue and franchise royalties year-over-year. It’s also beneficial to see businesses making smart investments and not losing their revenue to extensive debt.

Franchise Valuations

Tying in with the last tip, a clear understanding of franchisee-related financials can help you conduct an accurate valuation.

Note: Companies or people selling a franchise or business are typically the ones performing valuations. That said, you can use similar principles as a potential franchisee to estimate your earnings.

Calculate or estimate to the best of your ability the following figures:

  • Franchise fees (both upfront and ongoing)
  • Your franchise’s expected revenue
  • Staff and operation-related expenses
  • Marketing costs

Before most people start a business, it never hurts to have an idea of its expected numbers. After diving deeper into a franchise opportunity and its industry, franchise valuations can provide helpful clarity.

Check for an Excellent Training Program

While not a requirement, it’s often beneficial for a potential franchise owner to have somewhat of a business background. But, no matter how much business ownership experience you have, a franchise program should always offer adequate training.

Franchise-related training is best when it covers real-world situations franchisees face. It’s also a plus if a franchisor provides ongoing training to continually develop their franchisees.

Support for Franchisees

No matter how comfortable you are with becoming a franchise owner, you probably don’t want to feel by yourself in this role. That’s why great franchise opportunities offer continuous support for their important franchisees. Excellent support helps ensure that a franchise owner has all they need to succeed, which is an important factor when evaluating a franchise.

Because franchise owners work with different business departments, people in this role can need support for different things. Look for a company offering multiple types of support with staffing, accounting, and other business areas. It’s also essential that franchise-related support teams are available during your working hours. While this quality may not be quantifiable, it should play a part in your franchise valuations.

Ask Questions

As much as we’d love to, it’s impossible to answer every question about franchise ownership in a single blog post. But it’s great to bring your questions to a company offering franchise opportunities. As our brains unfortunately do, they sometimes forget things. So, write down or enter questions in your phone as they pop into your head.

Don’t feel like you’re being a pest if you have many things to ask. A company with a great franchise opportunity shouldn’t have problems answering your questions. The answers you receive from potential franchisors could be what helps you choose the best franchise opportunity.

From franchise valuations to asking questions, it can take time and effort to find the right franchise opportunity. Many new franchise owners are experiencing success within the in-home care industry. Recent data from the United States Census Bureau found that the in-home care industry experienced a 50.5% revenue increase from 2013 to 2020. As the senior citizen population grows, these people can rely on your elder care business.

1Heart Caregiver Services gives eager people the opportunity to own a successful in-home care franchise. We offer every franchisee a dedicated agent and support team who’s always in this person’s corner. Speak to the welcoming team at 1Heart Caregiver Services to learn more about entering the senior care industry in your community.

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