Valuation of a Franchise Network

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

2yrs ago

Valuation of a Franchise Network

We are looking at an opportunity to acquire a franchise network. Two key questions regarding valuation:

1) Royalties are by definition a recurring revenue, but arguably much more reliable than typical contracted revenue. Should it command higher mupliples?
2) How do you factor in future cash flow from locations already sold but not yet in operation? Is NPV calculation based on other locations' performance an acceptable substitute for the typical TTM or 3Y cashflow analysis?

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