Business Valuation Mandate for a Fast Food Franchisee
Independent valuation of a multi-unit fast food franchisee conducted to support strategic financial discussions
Mandate Description
The mandate consisted of a business valuation assignment carried out on behalf of a French franchisee operating between five and ten outlets of an international fast food brand.
The objective of the assignment was to determine the economic and financial value of the operating perimeter, taking into account the specific characteristics of the franchise model, including contractual structure, royalty mechanisms, recurring capital expenditures and brand dependency.
The valuation aimed to provide an independent analysis to support the franchisee’s strategic discussions with financial partners.
Key Issues
One of the main challenges of the mandate was to identify the true profitability drivers in a sector characterised by tight margins and a highly standardised operating model.
The analysis needed to incorporate both operational factors, such as revenue by outlet, royalty rates, payroll costs and rental expenses, and strategic factors, including remaining franchise contract duration, brand dependence and renewal potential.
From a financial perspective, the valuation relied on discounted cash flow modelling and sector-based comparative analyses.
Observed valuation multiples for franchised fast food businesses generally ranged between six and nine times EBITDA, depending on the number of outlets, revenue stability and leverage level.
The assignment also required assessing the franchisee’s financing capacity and the investment structure specific to the franchise model, including goodwill, commercial leases and supply agreements.
Approach and Results
The valuation approach was based on forward-looking modelling of the consolidated performance of the different outlets.
- Normalised cash flows were reconstructed, and a distinction was made between value attributable to the brand and value generated by the franchisee’s own operational management.
- Specific analyses were conducted on the economic value of the retail portfolio, differentiating mature locations from recently opened units.
The analysis resulted in an economic valuation range consistent with market benchmarks and provided the client with a structured and well-supported basis for discussions with investors and banking institutions.
The transactions shown include those completed by, or with the involvement of, Hectelion team members in current or previous professional roles. They are presented for illustrative purposes only and do not imply exclusive responsibility by Hectelion.
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The transactions presented were carried out by, with the contribution of, or with the participation of members of the Hectelion team in the context of functions performed currently or previously.