Franchise multiples and things to watch out for

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August 15, 2025

by a searcher from Carnegie Mellon University in Denver, CO, USA

I’m exploring the acquisition of a home services franchise, but I’m wondering if the SDE multiple should be lower. In this type of franchise (and likely most), growth is limited to the territories included in the purchase since expansion outside the assigned area isn’t allowed. Am I thinking about this correctly? Also, what key factors should I focus on during due diligence for a franchise acquisition? For example, franchisor fees, non-compete clauses, or options to acquire non-franchise businesses.
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Reply by a searcher
in Denver, CO, USA
FWIW, in my few years of searching, I never heard anyone discuss a discount for franchises on account of geo constraints. Granted, I didnt have a specific focus on franchises, but did bid on one. I get your thinking but I'm not sure that shows up in practice. You have to play the game on the field – if you're the only bidder, then bid down the multiple (i.e. <3x) and, if not, decide if you want to pay what the market is bearing.
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Reply by a searcher
from University of Texas at Austin in Dallas, TX, USA
Yes I think you are correctly identifying this won't be a high growth biz and the multiple should reflect this. What is the multiple on your estimate of forward looking SDE?
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