Franchise refreshes

May 04, 2026

by a searcher from University of California, Los Angeles - UCLA Anderson School of Management in Santa Monica, CA, USA

If you are doing a franchise deal how do you deal with the possibility of regresh spend in the near future?

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Reply by a searcher
from The University of Georgia in Atlanta, GA, USA

Refresh capex needs to be baked into your valuation and cash flow plan. The franchisor will often have requirements in the franchise agreement to complete a refresh on a specific timeline (every 5-10 years) with different scope and cost depending on the brand's current strategy and age of the asset. You should diligence what these standard requirements are in conversation with the franchisor and franchisees and confirm expectations match legal requirements in the franchise agreement. In addition, I'd recommend a broader eval of the quality of the location pre-closing, including what maintenance and refresh capex has been completed historically and any potential issues outside of the standard refresh. You should ensure all locations are up to brand standards at closing with any deferred maintenance or brand compliance issues corrected ASAP.

Reply by a searcher
from University of Michigan in Raleigh, NC, USA

In my experience, if you just acquired a franchise, they will give you a grace period to make the updates/refreshes. With that being said, check your FDD and discuss it with franchisor ahead of time. A good franchisor will want to make sure you are set up for success...when you win they win. There are plenty of not-so-great franchisors too. Do your due diligence, review the franchisor financials, talk to other franchisees (not just the ones the franchisor recommends you talk to) and review the # of locations year-over-year. You also just want to make sure you are well capitalized in general...have a good LOC, 3-6 months of cash in the bank and creating predictable profits.

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