How to Buy a Restaurant Franchise in 2026

Buying an existing restaurant franchise is not the same transaction as buying an independent restaurant. You're not just negotiating with the seller — you're also negotiating with the franchisor, and the franchisor has veto power over the entire deal. I've watched buyers spend six months on due diligence, secure SBA financing, and then get rejected by the franchisor in week 22 because their liquid capital came in $40,000 short of the brand standard.

If you're looking at a resale of a Jersey Mike's, a Taco Bell, a Tropical Smoothie Cafe, or any other franchised concept, the playbook is different from what you'd run on an independent deal. Here's how to approach it.

Why Buy an Existing Franchise Instead of Opening New

A new franchise build-out on a QSR like Jersey Mike's or Jimmy John's runs $350K-$600K all-in (franchise fee, equipment, leasehold improvements, opening inventory, working capital). A full-service casual dining build like a Buffalo Wild Wings or Applebee's can hit $3M-$5M. And you wait 12-18 months to open, then burn through another 12-24 months before the unit hits steady-state cash flow.

A resale cuts that timeline to zero. You inherit a location that's already operating, staffed, and generating trailing twelve-month cash flow you can actually underwrite. Most resale QSR units trade for 2.0-3.5x SDE or 3.5-5.0x EBITDA, with multi-unit operators at the higher end. Independent restaurants, by contrast, trade at 1.5-2.5x SDE because they don't carry brand equity. You pay a premium for the franchise system, but you get proven unit economics in return.

The FDD Is Not Optional Reading

The Franchise Disclosure Document is a 200-300 page document every franchisor is required by the FTC to give prospective franchisees before any payment changes hands. When you buy a resale, you still need to receive and review a current FDD because you're signing a new franchise agreement as the transferee.

The items you actually need to read: Item 5 (initial fees), Item 6 (ongoing royalty and marketing fund contributions — usually 5-6% royalty plus 2-4% marketing), Item 7 (estimated initial investment, which tells you the brand's minimum liquid capital requirement), Item 19 (Financial Performance Representations — the only place the franchisor discloses actual unit revenue), and Item 20 (system growth and closures, which is where you find out if the brand is expanding or contracting).

A brand with 15% unit closures over the last three years is a red flag the seller will not volunteer. I've seen buyers discover mid-diligence that their target brand lost 80 units in the prior year — the concept was dying and the franchisor was not being transparent about it. Read Item 20 first.

Franchisor Approval: The Gate You Have to Pass

Every franchise agreement contains a transfer clause. The franchisor has the right to approve or deny any new owner, and in practice they exercise it. Approval generally requires you to meet four bars.

Net worth and liquid capital. Most QSR brands require $300K-$500K net worth and $150K-$250K in liquid capital per unit. Full-service brands often require $1M+ net worth. Subway is on the lower end ($80K liquid), Chick-fil-A is famously impossible (you don't actually buy the real estate or equipment). McDonald's requires $500K unencumbered liquid capital and prefers operators with $1M+ net worth.

Operating experience. Many franchisors now require prior multi-unit restaurant or retail management experience. First-time operators are increasingly being steered into brands like Subway, Jan-Pro, or Tropical Smoothie that still take inexperienced buyers. Brands like Chipotle, Raising Cane's, and In-N-Out don't franchise at all — if you see one listed for sale, it's a scam or a miscategorization.

Background check and interview. The franchisor will run credit, criminal, and civil litigation checks. Most brands require a Discovery Day visit to corporate headquarters where they interview you in person. They are assessing whether you'll protect the brand — one bad operator can damage system-wide sales.

Right of first refusal. Roughly 40% of franchise agreements give the franchisor a ROFR on any resale. They can step in, match your offer, and buy the unit themselves. This doesn't happen often, but it can and does, especially on high-performing units in desirable markets. Factor the ROFR timing (usually 30-60 days) into your LOI.

Transfer Fees and Hidden Costs

Franchise resales carry costs that don't exist on independent deals. Budget for all of them before you sign the LOI.

• Transfer fee: Typically $15,000-$50,000 paid to the franchisor at closing. Subway is $7,500 per unit. Dunkin' is $40,000-$80,000 depending on market. McDonald's is effectively negotiated into the deal structure.
• Training fee: $10,000-$25,000 for you and one general manager to attend the brand's training program. Non-negotiable. You cannot operate without completing it.
• Remodel or reimaging obligation: If the unit is behind on the brand's current prototype, the franchisor will often condition approval on a remodel at closing or within 12-24 months. QSR remodels run $150K-$400K.
• New equipment requirements: Brand standards change. Expect $30K-$100K of mandatory equipment upgrades (new POS system, new kitchen equipment, drive-thru timers).
• Legal review of FDD and franchise agreement: $5,000-$15,000 with a franchise-specialist attorney. Do not use a generic M&A attorney for this.

Financing a Franchise Acquisition

The good news: franchises are the easiest small businesses to finance. Most major brands appear on the SBA Franchise Directory, which means SBA 7(a) loans up to $5M are available with standard documentation. Lenders love franchise deals because they have comparable unit economics to underwrite against.

Typical structure: 10% buyer equity, 10% seller note (standby for the first 24 months), 80% SBA 7(a) at prime + 2.75% on a 10-year amortization. If real estate is included, the real estate portion stretches to a 25-year amortization, which significantly improves cash flow coverage. A $1.2M deal with real estate will typically DSCR at 1.4-1.6x, well above the 1.2x lender minimum.

Live Oak Bank, Huntington, Byline Bank, and Newtek are the most active SBA lenders for franchise deals. Get pre-qualified with at least two before you start making offers — having a lender ready speeds up the process and gives you negotiating leverage with sellers.

Due Diligence Items Specific to Franchise Resales

Run standard financial DD (trailing 36 months P&Ls, bank statements, sales tax returns, payroll records, vendor invoices), but add these franchise-specific items to your checklist.

Royalty and marketing fund compliance. Pull the seller's last 36 months of royalty statements from the franchisor. Any past-due royalties transfer with the unit, and the franchisor will require them cured at closing. I've seen $60K of back royalties surface in week three of diligence.

Operational audit scores. Most franchisors conduct quarterly or semi-annual operational audits (QSC, food safety, brand standards). Ask for the last eight audit reports. A unit with repeated failing audits is either an operational turnaround or a sign the staff will need wholesale replacement.

Lease assignment and term. Most franchise leases are 10-year with two 5-year options. If the primary term has less than 5 years remaining, renegotiate the lease as a closing condition. SBA lenders require lease term matching the loan amortization — no 10-year lease, no 10-year loan.

Item 19 comparison. Compare the seller's actual unit sales to the Item 19 system averages. A unit running at 70% of the brand average is either a turnaround opportunity or a structurally weak location. Drive the trade area yourself before you believe either story.

Training and the First 90 Days

Every franchisor requires new owners to complete their training program before taking over operations. Programs range from 2 weeks (Subway, Jan-Pro) to 12 weeks (McDonald's Hamburger University, Chick-fil-A) to 6 months (some full-service brands). You cannot close the deal until training is complete or scheduled.

Plan the transition so that training happens in parallel with the last 30-45 days of diligence and closing. Budget a paid general manager to run the unit during your training absence if you don't already have one in place. Retaining the seller's GM through the first 6-12 months is usually worth whatever retention bonus it takes — franchise unit performance is highly sensitive to GM continuity.

What a Good Franchise Resale Looks Like

The best resale deals I've seen share a profile: 5+ years of operating history, flat-to-growing same-store sales, above-system-average unit economics (Item 19 comparison favorable), a GM willing to stay, a lease with 7+ years remaining, no pending remodel obligation, and a seller motivated by retirement rather than distress. At 2.5-3.0x SDE with SBA financing, these units cash flow comfortably from day one and build equity every month.

The deals to walk away from: declining same-store sales, pending mandatory remodel, failing audits, GM already gone, short lease, franchisor ROFR likely to be exercised, or Item 20 showing net unit closures system-wide. A cheap multiple on a broken unit is not a bargain — it's a capital trap.

Before you submit an LOI, run the unit through our valuation calculator and compare against the brand's Item 19 system averages. If the seller is asking 4x SDE on a unit that operates at 80% of system average, you're paying for performance the unit doesn't deliver.