Franchise Rules of Thumb From A to Z

NOTES:

(1) Sales seem to indicate that smaller sales bring a higher multiple (50% +) than stores with sales over a million, which seem to bring lower multiples. Price is plus inventory which may be the cause of lower multiples for larger stores.

(2) $1,000 to $1,800 per team in sales; selling price – $2,000 to $2,500 per team

(3) 3 – 4 times earnings

(4) 2 times annual EBIT, plus inventory & equipment

(5) Master/Area developer – Sell for 3 to 5 times earnings plus some blue sky for size and potential of market (some cases).

(6) Prices for Curves for Women seem to be all over the place. Some sales have been reported at 75+% of sales. One sale reported was 1.31 times sales for four units.

(7) In … Dunkin Donuts shops now sell for 75 – 125% of annual sales, depending mainly on geography. It’s about 125% in New England, 100% of sales in the Mid-Atlantic States, and lower in the South and Midwest. There really is not a Dunkin Donut market in the West. A sale in Colorado was reported that sold for 22% of sales.

(8) Eagle is a Texas based franchise www.eagletransmission.com. They are the strongest transmission franchise in the Dallas area with 21 locations and are a minor player in Houston and Austin. The attraction is the royalties at 4% in Dallas and 6% Houston and Austin, and the training is “hands on” locally.

(9) These stores sell for maximum 2 times SDE versus $120,000 to $150,000 + for new. 10 to 12 sales have been reported at 2 times SDE for absentee owner stores (most are) and 2 times SDE + manager’s salary of owner operated.

(10) Netted $2,100,000 and seller retained 20% of ownership

(11) One sold for 80% of sales, but it was located in an office building with vending rights

(12) One MaggieMoo’s Ice Cream & Treatery sale was reported at 92%, three years old, great location, growth at 15% approx a year; but only 15% down payment

(13) 1 – 4 times SDE plus hard assets. The number between 1 – 4 depends on several factors such as the owner operating a truck, etc.

(14) The only sale repported of Papa John’s was a 3-store chain which sold for $475,000 with $150,000 down and grossed $1,191,700.

(15) Pizza factory has approximately140 units in the 10 Western States.

(16) Quiznos, which has struggled as a higher-priced alternative to Subway, has closed an estimated 1,000 of its U.S. shops (the company won’t confirm the number) and has begun putting mini-stores in gas stations in a bid to boost sales. April 2011,www.msn.com

(17) One sale was reported at 70% of sales.

(18) “As a former multi-unit Subway franchisee and a Development Agent, now a business broker Subway stores, there are many different formulas I have seen. 30 to 40 weeks sales, or 60 to 70% of sales is a popular one. Actual sales price depends on supply and demand and is closer to 70% of sales in So. CA.” “On stores with gross sales of $300,000 to $500,000, multiple of 40% of annual sales. On stores with sales of $500,000+, multiple of 50% of annual sales. Franchisor would like 30% as a down payment on resales.” “I would suggest for Subway, in New England and maybe all of New England, due to the high number of pizza restaurants, Subways tend to sell for a much lower of percentage of sales than 47% — sometimes as low as 20 – 25%.”

(19) Price does not include cost of vehicles, and revenues do not include auto sales.

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