RESALE DEAL KIT · FDD ITEMS 6, 17 & 20
Buying an existing Honest-1 franchise
Honest-1 units do come up for sale: its own FDD Item 20 shows 0 franchised outlets transferred to new owners in fiscal 2025 — 0.0% of the 59 franchised outlets open at the start of the year, and 1 across 2021–2025. The 2026 FDD sets the transfer fee at $27,000. This kit covers the franchisor's transfer terms, the resale record, a check on the asking price, and what to get from the seller.
| Term | What Honest-1's FDD says | Source |
|---|---|---|
| Transfer fee | $27,000$27,000 total to transfer: $2,000 application fee + $25,000 transfer fee; non-refundable; subject to state law | Item 6, PDF p. 15b) $25,000 transfer fee |
| Franchisor consent standard | Franchisor's sole discretionThe franchisor has the right and sole discretion to approve all transfers, subject to state law. | Item 17(l), PDF p. 44we have the right and sole discretion to approve all transfers |
| Franchisor right of first refusal | Yes — the franchisor can match your buyer's offerThe franchisor can match the terms of any bona fide offer, waived if transferring one center to a legal entity you control. | Item 17(n), PDF p. 45We can match the terms of any bona fide offer. |
| Buyer signs the then-current agreement | Yes — the buyer signs the then-current franchise agreementAs a condition of transfer approval, the transferee must sign the then-current franchise contract. | Item 17(m), PDF p. 44then-current contract signed |
| Term the buyer gets | Not addressed in the Item 17 summary — ask, and read the franchise agreement's transfer section | Item 17, PDF pp. 43–46 |
| Remodel / upgrade at transfer | Not addressed in the Item 17 summary — ask, and read the franchise agreement's transfer section | Item 17, PDF pp. 43–46 |
| Buyer must complete training | RequiredThe transferee must complete the franchisor's training as a condition of transfer approval. | Item 17(m), PDF p. 44transferee completes training |
| General release of claims | RequiredA release must be signed as a condition of transfer approval, subject to state law. | Item 17(m), PDF p. 45release signed |
Item 17 is the FDD's summary of the franchise agreement. The agreement itself controls, and a resale buyer usually signs the franchisor's current one, so check these terms against the FDD you will actually be given. Software read each value from the filing text, and each quote was matched back to that text. Values we could not match are left out, not guessed.
| Fiscal year | Transfers | % of franchised units | Exits | Reacquired | Franchised at start |
|---|---|---|---|---|---|
| 2021 | 0 | 0.0% | 1 | 0 | 64 |
| 2022 | 0 | 0.0% | 2 | 0 | 63 |
| 2023 | 0 | 0.0% | 1 | 0 | 62 |
| 2024 | 1 | 1.6% | 2 | 0 | 61 |
| 2025 | 0 | 0.0% | 1 | 0 | 59 |
A transfer is an owner selling a unit that keeps operating. An exit is a unit that left the system. Item 20 doesn't say why any unit left or what any unit sold for. In Honest-1's latest year, units left the system but none transferred. Ask the franchisor how many units resold in the last three years, and at what prices. Reacquisitions (0 in fiscal 2025) are the franchisor buying units back. Ask whether that was strategy or a rescue. A location that has changed hands repeatedly is the classic churning pattern, so ask how many owners yours has had and call the last one. Former franchisees are listed in the FDD exhibits.
Financing assumptions (change to your lender's terms)
- Equity default: SBA SOP 50 10 (version 8 onward, now 8.1): minimum 10% equity injection on a complete change of ownership, of which a seller note on full standby can cover part. Lenders often ask for more. SBA SOP 50 10
- Rate and term default: 9.49% (shown rounded) is the median initial rate on 10-year SBA 7(a) loans to franchise brands approved FY2026 (Oct 2025 – Jun 2026, n = 2,206), from SBA loan-level data. Most 7(a) rates float with Prime, so use your lender's quote.
Enter the asking price to start. Nothing you type leaves this page.
This estimate is computed by software from the brand's public filings and any inputs you enter. No CPA prepared it for you and no assurance is provided on it. Actual results will differ, and the differences may be material.
- Three years of P&Ls and the matching federal tax returns. Monthly or quarterly P&Ls plus the business returns for the same years. If the returns show less profit than the P&Ls, the returns are usually closer to the truth.
- The royalty and sales reports filed with Honest-1. The seller paid royalties on this revenue, which makes it the hardest number in the deal to inflate. It should tie to the P&L top line.
- Bank statements for the same period. Deposits are the third check on revenue, and they show cash a P&L can hide.
- The add-back schedule behind the “owner benefit” or SDE figure. List every add-back with its support. For each one, ask whether the cost will exist for you. A manager you'll have to hire is a cost, not an add-back.
- Every notice from the franchisor: defaults, cures, inspections and audits. Ask for three years of them. An open default can block the transfer or become your problem the day you close.
- The lease, all amendments, and the landlord's consent terms. You need the remaining term and renewal options, any rent steps, and the personal guarantee that assignment may require of you.
- Equipment list with ages, plus any equipment leases and liens. Run a UCC lien search. Note what the franchisor will make you replace at transfer.
- Payroll records and the staff roster. Who is staying, at what wage, and whether the seller's own unpaid hours are propping up the margin.
- The seller's franchise agreement and amendments. Check the remaining term and any side letters, discounts or territory rights. These often don't carry over to a buyer.
- The current Honest-1 FDD and the agreement you will sign. A resale buyer still gets an FDD, and usually signs today's agreement. Its royalty, fees and territory terms can differ from the seller's.
Ask the seller
- Why are you selling, and when did you decide?Then ask neighbouring owners and the franchisor the same question. The answers should match.
- How many owners has this location had, and who did you buy it from?If it has changed hands repeatedly, call the earlier owners.
- Has the franchisor sent you any default, cure or compliance notice in the last three years?Get copies. Ask if anything is open today.
- Do the P&Ls tie to the tax returns and the royalty reports, year by year? If not, why not?
- How many hours a week do you work in the business, and in which roles?If you won't fill those roles yourself, that labour is a cost.
- Will you carry a seller note, and will you stay on for a transition period?Under SBA rules a seller note can count toward your equity only if it is on full standby.
Ask Honest-1 (the franchisor)
- Please confirm in writing the transfer fee and every condition you will set for this transfer.The 2026 FDD summary is a starting point. The conditions that bind you are the ones the franchisor sets for this deal.
- Send me the current franchise agreement I would sign, and list how it differs from the seller's: royalty, ad fund, technology fees, territory and term.Honest-1's FDD says the buyer signs the then-current agreement, so the seller's economics may not transfer.
- What term will I get: the remainder of the seller's, or a new full term? What will renewal require?
- Will you require any remodel, upgrade or equipment replacement at transfer?
- Will you waive your right of first refusal on this deal? If not, how long do you have to decide?Honest-1 can step in and buy the unit on your terms. Your diligence spend is at risk until that window closes.
- When and where is the training I must complete, what does it cost, and can the sale close before I finish it?
- Is this unit in good standing today: royalties current, no open defaults, no pending audit?
- How many units resold in the last three years, and at what prices or multiples?Item 20 counts transfers, but not prices.
- Is a new unit, or a non-traditional location, planned inside or next to this territory?
Ask other owners and the previous owner
- Call the previous owner of this location, if the seller isn't the first: why did they sell?
- Ask recent resale buyers: did the transfer go as the FDD describes? How long did approval take, and were there surprise upgrade costs?
- Ask owners nearby what units like this one actually sold for, and what they clear after debt service.
SBA 7(a) loans finance franchise resales routinely. The bank underwrites the unit's real historicals rather than a projection. Lenders will know the brand's loan record. SBA loans to Honest-1 franchisees approved 2005–2020 defaulted about as often as franchise loans made in the same years: 8 charge-offs among 56 resolved loans, where about 7.1 would be expected (1.1×). Across all years, 8 of 56 resolved loans were charged off (raw rate 14.3%, all eras mixed). Borrowers are matched to the brand by name and SBA franchise code.
The Deal Review on a resale ties three years of the seller's P&Ls to the tax returns and the royalty reports, tests every add-back in the “owner benefit” figure, and works out what the unit clears after your debt service. It is an analysis. It is not an audit, a review or a quality-of-earnings attestation. Start with the free call. It is an educational session, not an engagement.
Talk through a resale →For comparison, the franchisor's Item 7 estimate to open a new Honest-1 is $285K–$1.3M (2026 FDD). Cost breakdown →
The Honest-1 validation checklist
questions built from this brand's own filings · read them all on the profile
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