Franchise

A franchise is a commercial arrangement whereby the franchisor grants the franchisee the right to operate its business concept, brand and know-how in exchange for royalties and an entry fee. In intangible asset valuation, franchise contracts are valuable assets — their value reflects the present value of future royalty streams. The relief from royalty method is the standard technique for valuing the franchisor's brand and network. In PPA engagements, franchise rights are separately identified and valued as distinct intangible assets.

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Example: in a PPA following the acquisition of a Swiss franchise network, franchise contracts are valued using the projected royalty stream method: 5% royalty rate on projected CHF 8.0 million annual revenues, average remaining term 7 years, discounted at 10%. The franchise contract value amounts to CHF 2.9 million — recognised as a separately identifiable intangible asset distinct from goodwill under IFRS 3.

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Hectelion values franchise assets — brand, contracts, know-how — in PPA, network sale and litigation expert mandates.