Hi all, I have looked at acquiring both franchises and independent operators in a number of sectors. Is there a rule of thumb on the valuation multiple spread between a franchise (resale) and an independent operator, assuming the businesses are identical in all other aspects? Obviously franchises have the additional fees (royalty, marketing, etc.) and there are also upfront transfer fees. Assuming after fees the 2 businesses have identical EBITDAs, growth patterns, margins, etc., what is your take on which should command a higher multiple, and what type of premium? I can see arguments on both sides for which should command a higher multiple - franchises offer something of a safety net with corporate support, name recognition and potentially less downside, though the franchisee is also constrained in what they can do with the business in terms of new services, geographical expansion, acquisitions, and also the franchisor will have a big say on the exit. In case you're curious, this relates mostly to residential and commercial services, but I would be curious if there is a general rule of thumb that is applied across the board. Thanks!
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
195 views
5 comments
Sign in to see all replies.
Create an account.