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Unbridled Capital

EBITDA

Video

04.02.2019

EBITDA is the key term, in the franchise industry, for evaluating the success of your business and the key driver to sourcing the best loan terms for your business. It is also a component in determining the value of your business. We’re going to give you EBITDA multiple ranges for 8-10 franchise brands in the current market place.

(NOTE) The information in this Video is for “informational purposes only” and Unbridled Capital disclaims any errors or omissions. Please talk to a CPA for any business decision.

Hey, this is Rick Ormsby, Unbridled Capital, and today I want to talk a little bit about EBITDA and EBITDA multiples. The first thing I'm going to tell you is a caveat. The information I'm giving you is for informational purposes only, and I disclaim any errors, or our company disclaims any errors or omissions or anything that I'm about to say. And also, I'd advise you to talk to your CPA or attorney before entering any kind of business decision.

EBITDA is earnings before interest, taxes, depreciation, and amortization, and it's the key term in the franchise industry for evaluating the success of your business on a cash basis. It also is the key driver of getting a loan. It's how buyers acquire more restaurants or franchises, and it's how people sell businesses, is based on EBITDA. And when I talk about EBITDA, I mean post GNA or post general and administrative cost EBITDA on a store-by-store level basis. There are about eight brands that I'm going to give you some EBITDA ranges for about what the values of these things are in this current marketplace. This is right now, and it's subject to wild changes based on interest rates, based on the success of the economy, based on brand-specific issues like, we all know about E. coli and rats in restaurants and things that affect brands on a national basis for a certain amount of time.

But right now in this market, I think... We're exempting four of the top 12, by system-wide sales, brands in the country, which these four would be McDonald's, Chick-fil-A, Subway and Starbucks, because their models are different to what we're doing. Then I want to take you through the eight remaining of the top 12. The first would be, by system-wide sales, Burger King, and burger King deals right now are trading in the five to six and a half times EBITDA range. I also want to tell you that these are dependent upon the size of the deal. The bigger deals are trading at higher values than the smaller ones are, and the geographies of the deal is deals as well, in addition to how high the AUVs or the sales volumes are in the actual restaurants, in this case, that are being sold or being valued or being financed where capital is being raised against them.

So we have Burger King first. The second would be Wendy's. Wendy's has been trading in the six to seven and a half times EBITDA range on a franchisee basis. The third would be Taco Bell, and Taco Bell's been a darling. Taco Bell deals have been going for seven and a half to nine times, or even maybe slightly higher as a multiple of EBITDA. And a lot of transactions have been happening in that brand, as in the Wendy's brand as well. We'd go down to Dunkin Donuts next. Dunkin Donut has been valued well, and they're in the six and a half to eight times range on some select deals.

The next would be your Applebee's business, and Applebee's is in the casual dining sector. They've been languishing a little bit, and you see a five to five and a half times EBITDA range for an Applebee's business. You see the one fast casual entrance into this space would be the Panera Bread brand, and they've typically been selling well. They've been selling in the, maybe the six to seven and a half times range. And then we have the KFC brand and the KFC brand's typically been in the four to five and a half times EBITDA range.

Taken altogether, I guess the general message would be that in the current marketplace, prices and valuations, for other reasons, have been relatively high. As a matter of fact, relatively high is probably not right. They've been historically high over the last 10 to 15 years. If you want to talk any more about this, we'd be honored to do it. Look us up and give us a call.