Franchise Network Acquisition

searcher profile

December 04, 2023

by a searcher from Yale University - School of Management in Boston, MA, USA

A franchise network has several locations signed and under development and will come online over the next 12 months. There are no past financials for these locations, obviously, to factor into the valuation. However, there are a number of other locations that can serve as proxies. What, in your opinion, would be a reasonable approach to take into account the expected future cash flow from these new locations for valuation purposes? Should a discount rate of some sort be applied? Is it reasonable to just apply historical network averages?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would recommend requesting the FDD (Franchise Disclosure Document). The FDD will provide details on historical performance for existing stores including the top tier and lower tier stores and averages. This is probably the best thing to use to make your assumptions. They need to have an FDD to provide disclosures to potential franchisees. I hope this helps.
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Reply by a searcher
from Vanderbilt University in New York, NY, USA
👉Check out this event in NYC dedicated to connecting searchers to franchising: https://lu.ma/search-franchising
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