Business Valuation – Master Cleaning Franchise (Mediation)

We were engage as a Business Valuers to assess a business being a master cleaning franchise for a mediation hearing.  The Franchisor was looking to buy back the regions from the Franchisee and our role was to arise at a fair market value to expedite the transaction.  The business was quite sizeable, covering six territories with over 1500 clients.  There was initial discussion was to whether or not to assess the six individual territories separately and then add them up to a total value.  It was the valuer’s opinion that this method would most likely produce a higher value figure than assessing the business as a whole.

Given the difficulty in separating the sales between the six territories and the reliance some territories had on the others, it was decided it was best to assess all as one business.  The business was long established, solid trading history, low rental with a long lease and a solid growth in sales.  What was most comforting was the consistent adjusted PEBITDA reflecting between 34% and 36% of the total annual turnover consistently for the past four financial years.

Sales data was difficult to find as it was decided that this business should be classified as a Master Franchise rather than a Cleaning Business as such.  A risk assessment produced a multiple that would further enhance this opinion and thus was adopted.  Therefore, the multiple of PEBITDA that was decided upon was higher than a Cleaning Business would achieve.