PressurePros 248 Report post Posted October 30, 2004 I would like some input from you guys/gals on this. I am looking to purchase a franchise operation (non PW related) I have done my own homework and my accountant has done the exhaustive research neccessary and has come up with an offering price that seems way too low to me. This is a retail operation supported by TV advertising, growing at a rate of 100% every three years, has a ten year background, offer excellent support and fits into a unique but broad customer niche. The business currently nets 15k per month average. What would you consider a fair offering price? Share this post Link to post Share on other sites
RyanH 14 Report post Posted October 30, 2004 Have you contacted the owners of the parent corporation to see what they require for a franchise fee? Usually they have a set rate depending upon where you set up. From the ones I have checked out, they usually ask for anywhere from a $15k up to and sometimes over $100k buy in fee just to use the name, plus what it costs to build a location to their standards using their equipment (usually several hundred thousand). That's for larger national companies (this was a few years ago I checked into this...things may have changed). Smaller companies generally are more flexible and lower in cost to start up. Very large companies, like McDonalds can be upwards of $1 million to begin. I've looked into a chicken wing mogul franchise and the buy in fee is around $30k with about $300k to establish the store, and the requirement to stay within strict guidelines. Not a bad deal if you can get the initial investment. Share this post Link to post Share on other sites
PressurePros 248 Report post Posted October 30, 2004 Hey Ryan, yes I know all the incurrent fees..the monthly franchise, advertising coop etc. This business has been established in its current location for three years. The initial transfer fee is 1% of the selling price paid to the parent corp. The only part I am hanging on is the offer to the current owner. Last year the business grossed 240 and is on track for a Dec to Dec this year of almost 275. Share this post Link to post Share on other sites
Henry B. 4 Report post Posted October 31, 2004 It only net's 15,000 a month? Don't get me wrong, that's not chicken feed or anything but it's not that much either. Are you getting out of power washing or just looking for extra income? If you want more income why don't you just expand your company by offering other services? Share this post Link to post Share on other sites
PressurePros 248 Report post Posted October 31, 2004 No Henry, I'm not getting out of pressure washing. I enjoy it too much. Though, at the same time, my customer count is not even in the same league as yours. This is strictly an investment that will be run by my sisters. I have some expansions slated for 2005 with PressurePros, Inc. None of which will dramatically grow the business overnight, but will strengthen the appeal of a "one-stop" company for home maintenance. Now I have to add, I enjoy a modest, comfortable income but I definitely look forward to the day when I can say adding almost four thousand dollars a week to my pocket is no big deal. Share this post Link to post Share on other sites
Beth n Rod 1,279 Report post Posted October 31, 2004 Speak to a lawyer who specifically handles franchise transactions. An Accountant is important, but in this instance, a lawyer could save you money and nightmares. Just my .02.... Beth Share this post Link to post Share on other sites
PressurePros 248 Report post Posted October 31, 2004 Thanks, Beth. I thing this is my fault for miscommunicating. I have done all the research, hired the entire team to investigate I don't even buy a house without a lawyer being present at seettlement. I personally have a degree in economics. The franchise is completely viable, it is the number one franchise in the world currently and is rated as best by every particular group that votes on such things. Every number has been verified, tax records scoured, I have sat in the business and personally watched the customer count. Its complete green light. Based upon the numbers I have given I am looking for opinions as to what anyone whom is reading this would think was a fair offer. (ie you own this franchise and I am coming to you cash in hand....what number would you seek?) I will just get to the nitty gritty and stop being vague. My advisors are ultra conservative. They have come back with a number of 180k. I think that is way too low and I am fearful of shutting down negotiations before they even get heated. This is the first time I have bought an existing business but I have sold a few. I always asked for at least a multiple of 1.8 to 2 times the yearly net. Is this still accurate? Share this post Link to post Share on other sites
RyanH 14 Report post Posted October 31, 2004 I still think you should speak with the current owner to determine his/her desire to sell it. If it's a case of you hoping to persuade him to sell it, you will probably have to go with a decreasing percentage payoff over a few years (like 80% of years profits the first year, 60% the next, 30% the next, 20%, then nothing). If he is wanting and willing to unload it, look at it as a standard investment and relate your initial investment amount as the amount you will be able to depreciate over X years and yield a comfortable return. MACRS is a standard method of depreciation, and depreciation on property can run many years...this is a case where an accountant is definitely required, and if they are following a logical line of reasoning, basing their inputs on realistic, real world numbers, then perhaps you should trust their suggestion. Unless the current owner ignores business principles and just wants lots of cash up front. Share this post Link to post Share on other sites
Henry B. 4 Report post Posted October 31, 2004 I wish I could help you on this but honestly, I've never baught or sold a company before. I have had a few offers to buy mine and one to buy part of a local competitors company but I wasn't intersted. The 4,000 a week in extra income would be nice don't get me wrong. But for me, it wouldn't be worth the extra headaches and management of another company to get it. I didn't realize the reasons you were doing this and how you were going about it. Best of luck in getting it all figured out! Share this post Link to post Share on other sites
PressurePros 248 Report post Posted October 31, 2004 Thanks for the input, guys. Ryan, I am buying the business outright as a cash deal. Owner is very motivated to sell. Her husband is approaching retirement age and he has been recently diagnosed with cancer. They want to move to Florida. We have been negotiating this sale for a few months. She has had offers from others but she personally knows both my sisters and feels comfortable turning the clientele over to them. I'm going to open things up tommorrow at 200k. Wish me luck. Share this post Link to post Share on other sites
RyanH 14 Report post Posted October 31, 2004 Sounds good. What I meant by my suggestion of depriciation wasn't to pay the owner over time...it was to get your invested money back over time. When you look at an investment, your investment capatal is basically "free money." Okay, well, not free, but you are able to depreciate it over a period of time, which means you are deducting the cost from your net income which reduces your tax liability. My suggestion was to work backwards on the concept to come up with a price that you can pay out in cash and, after depreciating that initial payment over X years to save on taxes, will yield enough money for you to pay your operating expenses as well as draw a decent salary. I'm looking at a similar situation myself, only I'm having to build the business from scratch instead of buying one, but I'm trying to get a few investors and am having to figure out how to compensate them. Good luck with the negotiating! Share this post Link to post Share on other sites
JFife 14 Report post Posted August 17, 2005 I don't know how I just found this, but PP, what ever happened?? My guess is.......Curves For Women???? Share this post Link to post Share on other sites
Neil_Asheville 114 Report post Posted August 17, 2005 The offer appears to be missing three zeros. Jon I'm curious, too. Since this appeared to be a well-established business with a solid nationally recognized brand position, a multiple of 6 to 9 times EBITA would have been a starting point. $15K/mo net is a $2.5 million dollar a year business assuming a net profit of say 7% on revenue. A 7% NP margin is healthy across the franchise spectrum. $180K offer for $215K/yr in earnings...I'll take 3, please. $1.29M to $1.93M is my online, anonymous, don't-know-nothin'-else-about-PP's-deal offer! Unless it was Curves and included hidden closed-circuit TV....that would have value :) Share this post Link to post Share on other sites
PressurePros 248 Report post Posted August 17, 2005 We bought it. Owner came back with 300 we found a happy medium and made settlement last February. We are currently around 910 members with 790 of them on check draft. I am looking for another one. Curves is an excellent franchise! Neil, your numbers are way off. Operational overhead is less than 10k per month. Share this post Link to post Share on other sites
JFife 14 Report post Posted August 17, 2005 PressurePros, My question is......why are you doing pwashing?? if you have the resources at your disposal to buy and sell franchises, why would you not just focus on that?? Clean, no physical labor, those type of businesses sell nicely......I can think of a hundred more reasons! Share this post Link to post Share on other sites
JFife 14 Report post Posted August 17, 2005 ....and i think that is a good price. Let's say you settled at $240, I think you made out like a bandit. Share this post Link to post Share on other sites
PressurePros 248 Report post Posted August 17, 2005 Jon, valid question... A franchise like Curves cannot have men in it, besides they run themselves with a good manager. I have run retail operations on regional management level for years and I dispise being indoors and stuck in one place. On the same note, I don't plan on being on my knees, sweat dripping off my nose in 110 degree weather much longer. I do the field work because I have to know the ins and outs of my operation before I expand it. You will be seeing some larger industry moves from PressurePros over the next couple of years. I have already introduced consumer line products in a test market and this spring I am doing the national intro via the net and a couple of Northeast key player paint stores. After that, the franchising of my entity has definite appeal. Share this post Link to post Share on other sites
JamesHayhurst 14 Report post Posted August 17, 2005 Jon, How did you guess so accurately? Or is this all just a joke? Share this post Link to post Share on other sites
PressurePros 248 Report post Posted August 17, 2005 James, check around, these things are gold mines. It doesn't take a rocket scientist to do the math. 900 members paying an average of $30 per month. Then go to Curvesinternational and look up the going prices. no joke, my friend. Share this post Link to post Share on other sites
JamesHayhurst 14 Report post Posted August 17, 2005 Well, that's really awesome! It's always great to hear a success story. Down here the Curves are sprouting up everywhere so it's easy to see the value of your investment. After I graduate college I definatley want to invest but right now I'm spread to thin with school and work. Good luck with your investments! Share this post Link to post Share on other sites
JFife 14 Report post Posted August 18, 2005 James, ....Joking about my guess that it was Curves?? I just lucked up this older post, the clues were that his sisters would run it, the seller was a woman, and it is one of the top franchises for the last few yrs. running. I'm a franchise junky---I stay on top of that stuff and know what the top ones are (they usually stay the same). Ken, I think I mentioned this in another post to you, but I'd suggest you research these two companies, Certa ProPainters and Archadeck. The have interesting franchise concepts, and would work well for the residental pwash business. Obviously, there is nothing wrong with re-inventing the wheel if you have some great ideas, but these models are capable in my opinion and may give you ideas. It is good to see you shooting big. I've always thought this residental pwash biz is prime for a good franchise concept, and you're the guy that can make a solid one, imo. Good luck with this, really, I hope you tear it up. Share this post Link to post Share on other sites
MeiersEnterprises 14 Report post Posted August 18, 2005 i sold my landscape company for 1.5 times the net profits for the previous 12 months. The buyout was written as such. I had to sell for personal reasons but I've heard of people getting as high as 3 times net... All depends on the business i'm sure... I want one of these franchises: http://www.franchiseonline.com/franchise/34221/isolditebaydropoffst.asp Thought about doing it myself... Share this post Link to post Share on other sites
