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Need advice on valuing/selling my franchise business not yet profitable.

Purchased/financed a B to B/B to C franchise 3 yrs ago for our son who has Crohns Disease. He's a top seller and needed a career where he could take time off for flare-ups. Hasn't worked out, he's been sick for the last 1.5 years and hasn't worked. Mom has been running the store but doesn't have the sales savvy needed to grow the business to the next level. The high dollar orders come from business accounts versus retail. Business is picking up but we still need to put in about $4k/month for the rent. 2 yrs left on lease w/5yr option. We owe about $175k in equipment and startup. 60% gross margin doing $6-10k/month, should easily be 3x that. Other franchisees are profitable, its a good concept, and a supportive franchisor. What could I ask?

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Biz2Credit LLC
New York County, NY

Patrick,

Key is you need to put a financial projection assuming that new owner will have the handicap like yours and he/she can increase sales. The franchise can be sold on comparable of other franchises which have been bought/ sold as well as length of lease left. Another key point is if it is in the SBA registry as being graded by SBA improves the valuation. You can check it at www.biz2credit.com and also help the buyer to get pre qualified for financing. We have over 80 lenders offering over 140 products.

May 3, 2010

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