Goodwill vs Assets
When you buy or sell a franchise unit, part of the price is real, touchable assets — and the rest is goodwill (the brand, the customers, the going concern). Split the deal and see what you're really paying for.
What this calculates
Splits a deal price into the tangible assets being transferred and the goodwill being paid for on top, then expresses goodwill as a share of the price and as a multiple of seller discretionary earnings. The split matters for negotiation, for financing and, in many jurisdictions, for tax on both sides.
What you will need
Tangible asset values. Equipment, fit-out and stock at realistic current value, not at what the seller paid. Kitchen equipment in particular depreciates faster than sellers expect.
Total price. The full consideration, including any deferred or earn-out element.
Seller discretionary earnings. Used to express goodwill as a multiple, which is how you judge whether the intangible portion is defensible.
How to read the result
A high goodwill share is not automatically bad, but it must be explained by something transferable — an established customer base, a strong site, a remaining agreement term of real length. Goodwill that rests on the departing owner's relationships is the part most likely to evaporate after completion. The split also has consequences neither side should discover late: lenders secure against tangible assets, and tax treatment of the two components typically differs, so agree the allocation explicitly rather than leaving it to the closing documents.
Questions about this tool
Is high goodwill a warning sign?
Only if nothing transferable supports it. A strong site with a long remaining lease and a repeat customer base can justify substantial goodwill; a business that runs on the owner's personal relationships cannot.
Why does the allocation matter to a lender?
Because lenders secure against assets they could recover. A deal that is mostly goodwill is harder to finance, which affects how much equity a buyer must find.
Does the split change our tax?
In most jurisdictions yes, and often in opposite directions for buyer and seller. Agree the allocation with your accountants rather than leaving it as an afterthought in the contract.
For reference only; not legal, tax, or investment advice. Results depend entirely on the figures you enter — check them against your own quotes and your franchise agreement before acting on them.