Any adjustment factors to consider when valuating a franchise business?

by a searcher from The University of Chicago - Booth School of Business

Sep 15,2020

I'm evaluating a franchise service business. The EBITDA multiple looks inline with this type and size of businesses. Is there any special adjustment factors for the franchise model (territory based)?

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lender from University of Missouri - Columbia

Hi Jenny, we do quite a bit of franchise lending, both startup and acquisition.The valuation could be impacted based on the industry and the brand (i.e. national, well known v. newer) but overall the multiple on most franchises is still driven by the cash flow.I would pay a lot of attention to Item #19 in the franchise FDD.Banks will focus on that item since it speaks to the success of the franchisees either nationally or in your area.Another good metric to look at is the franchisor financials.Specifically focusing on the revenue derived from royalties v. new franchise fees.Let me know if you would like to discuss further --@----.com

03/15/2022 | like reply | 0 likes

searcher

Hi Jenny - Searchfunder has partnered with IBISWorld Industry Research to provide the community of Searchers access to over 1,300 industry research reports. Depending on which industry, the Financial Ratios portion of IBISWorld reports could be assistance for you here. Open the Menu dropdown here in Searchfunder and find IBISWorld under "searchfund tools". I hope this helps!

09/16/2020 | like reply | 1 like

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