Methodology
Every assumption behind the number
Nothing in a valuation is hidden inside a single opaque score. This page lists every constant, threshold and data source the calculator uses — including exactly where each brand's multiple range comes from — so a result can be checked against what actually produced it.
For the arithmetic behind any single result, open “What this range assumes” and “Why this number” on the calculator itself — this page covers the rules those sections are built from.
What every range assumes
- Values the business as a whole, on the trailing twelve months of figures entered.
- Cash-free and debt-free: assumes the seller keeps the cash and clears any loans at closing.
- Includes the equipment, leasehold improvements, inventory and deposits entered, and normal working capital.
- Excludes real estate. If the property is owned, value it separately and add it — it is not folded into this number.
- Excludes the buyer's own transaction costs, training, and the working capital they will need after closing.
- Assumes the franchisor approves the buyer and the lease transfers on current terms.
Recasting the P&L into SDE and EBITDA
The expense lines entered are treated as the complete set of reported costs — they already take revenue down to net profit, and every add-back below is assumed to already be sitting inside them.
Seller's discretionary earnings (SDE)
Operating profit, plus every add-back below that was entered as greater than zero. This is what a buyer who works in the business actually takes home.
- Owner's compensationA buyer who works in the business takes this pay themselves.
- Owner's personal benefitsPersonal vehicle, phone, travel and insurance run through the business.
- Depreciation and amortisationA non-cash charge, so it does not reduce what the business generates.
- Interest expenseA financing cost of the current owner, not of the business itself.
- One-time expensesCosts that will not repeat for the next owner.
EBITDA
SDE minus a market-rate manager salary. Replacing the working owner with a hired manager is the only difference between the two bases — nothing else is added back or taken out.
The suggested manager salary is $65,000 for the first unit plus $45,000 for each additional one — a general manager for the flagship location and a lighter-weight unit manager for every unit after it.
If entered royalties and ad fund come in under half of what the brand's own rates would imply on that revenue, the result flags it — that gap is more often a missing expense line than a real discount.
Four methods, weighted by who the realistic buyer is
SDE, EBITDA and discounted cash flow are blended by one of two fixed weighting schemes, chosen by unit count and owner involvement. Asset value is never blended in — it is applied afterward as a floor beneath the blended range.
| Basis | Applies when | SDE weight | EBITDA weight | DCF weight |
|---|---|---|---|---|
| Operator | Fewer than 3 units, and the owner is not absentee. | 55% | 20% | 25% |
| Investor | 3 or more units, or the owner is absentee. | 25% | 50% | 25% |
A method that isn't usable (zero or negative earnings on that basis) drops out and its weight is redistributed across the rest. If none of the three earnings methods are usable, the result falls back entirely to asset value.
Every qualitative factor is an itemised delta added to the brand's benchmark multiple — additive, so order doesn't matter, only the sum does.
Revenue trend
| Condition | Delta |
|---|---|
| Growing strongly (double-digit) | +0.35x |
| Growing | +0.15x |
| Flat | 0 |
| Declining | −0.30x |
| Declining sharply | −0.60x |
SDE margin vs. brand norm
| Condition | Delta |
|---|---|
| 30%+ above the brand's typical margin | +0.25x |
| 10–30% above | +0.12x |
| Within 10% either side | 0 |
| 10–30% below | −0.15x |
| 30%+ below | −0.30x |
Revenue per unit vs. system average
| Condition | Delta |
|---|---|
| 25%+ above average | +0.20x |
| At or above average | +0.08x |
| Up to 25% below average | −0.10x |
| More than 25% below average | −0.25x |
Franchise agreement term remaining
| Condition | Delta |
|---|---|
| Under 2 years | −0.60x |
| 2–4 years | −0.30x |
| 4–7 years | 0 |
| 7+ years | +0.15x |
Lease term remaining
| Condition | Delta |
|---|---|
| Under 2 years | −0.45x (scaled) |
| 2–4 years | −0.20x (scaled) |
| 4–8 years | 0 |
| 8+ years | +0.10x (scaled) |
Owner involvement
| Condition | Delta |
|---|---|
| Full-time owner-operator | 0 (baseline) |
| Semi-absentee | +0.15x |
| Absentee | +0.30x |
Management depth
| Condition | Delta |
|---|---|
| No management layer | 0 |
| Partial management layer | +0.05x |
| Full management layer | +0.15x |
Portfolio scale
| Condition | Delta |
|---|---|
| 1 unit | 0 |
| 2 units | +0.15x |
| 3–4 units | +0.35x |
| 5+ units | +0.55x |
Operating history
| Condition | Delta |
|---|---|
| Under 2 years | −0.25x |
| 2–5 years | −0.05x |
| 5–10 years | 0 |
| 10+ years | +0.10x |
Staff stability
| Condition | Delta |
|---|---|
| Strong / tenured team | +0.12x |
| Average turnover | 0 |
| Weak / high turnover | −0.20x |
Competition
| Condition | Delta |
|---|---|
| Low | +0.10x |
| Moderate | 0 |
| High | −0.15x |
Local market direction
| Condition | Delta |
|---|---|
| Growing | +0.12x |
| Stable | 0 |
| Declining | −0.18x |
Market type
| Condition | Delta |
|---|---|
| Urban | +0.05x |
| Suburban | 0 |
| Rural | −0.10x |
Clamped to reality. However the deltas above sum, the resulting multiple is held to within 0.5x below and 0.75x above the brand's own observed range (and never below 0.75x SDE outright) — so no combination of qualitative factors can push a business further than the brand actually trades. The low–high spread is never allowed to collapse below 0.25x either, so the range never reads as false precision.
Lease term matters less for van-based models. Home-services brands with no fixed storefront apply the lease-term delta at roughly a third of its normal weight.
EBITDA moves with SDE. The EBITDA multiple range isn't adjusted separately — it is the brand's EBITDA range scaled by the same proportional shift the SDE multiple received, so a premium earned on one basis carries through to the other.
Where the brand multiples come from
Every brand's royalty rate, ad fund rate, average unit volume and multiple range is seeded data, not something the calculator derives. It is an illustrative industry-range estimate assembled from publicly discussed Franchise Disclosure Document Item 5, 6, 7 and 19 figures and business-broker commentary — not audited data, and franchisors revise their terms every year.
Before relying on a number in a real transaction: replace these figures with those from the brand's current Franchise Disclosure Document and with multiples from actual comparable sales. The “reviewed” year and source note below are shown for exactly this reason — so you can see how current the underlying number is before you trust it.
| Brand | Category | Royalty + ad fund | SDE multiple | EBITDA multiple | Reviewed | Source |
|---|---|---|---|---|---|---|
| Anytime Fitness | Fitness | 7.0% | 2.50x–3.50x | 3.20x–4.80x | 2025 | Illustrative estimate; royalty converted from a flat monthly fee at typical AUV. |
| Dunkin' | Quick service restaurant | 10.9% | 2.50x–4.00x | 3.50x–5.50x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| Great Clips | Personal services | 11.0% | 2.00x–3.00x | 2.50x–3.80x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| Jersey Mike's | Fast casual | 11.0% | 2.20x–3.40x | 3.00x–4.60x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| McDonald's | Quick service restaurant | 8.0% | 3.00x–4.50x | 4.50x–6.50x | 2025 | Illustrative estimate; McDonald's resales are franchisor-brokered and terms vary widely. |
| Midas | Automotive services | 15.0% | 2.00x–3.20x | 2.80x–4.20x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| Orangetheory Fitness | Fitness | 10.0% | 2.50x–3.60x | 3.50x–5.00x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| Planet Fitness | Fitness | 9.0% | 3.20x–4.80x | 5.00x–7.50x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| SERVPRO | Home services | 10.0% | 2.50x–4.00x | 3.50x–5.50x | 2025 | Illustrative estimate; royalty is a sliding scale in the actual agreement. |
| Subway | Quick service restaurant | 12.5% | 1.80x–2.80x | 2.50x–4.00x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| Taco Bell | Quick service restaurant | 9.8% | 3.00x–4.20x | 4.00x–6.00x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
| The UPS Store | Business services | 7.5% | 2.00x–3.20x | 2.80x–4.00x | 2025 | Illustrative estimate from public FDD summaries and broker listing ranges. |
Picking “Other franchise” in the calculator uses generic small-franchise defaults that aren't tied to any specific system — enter your own royalty rate, multiple and transfer fee under Advanced instead. Any of the seeded figures can also be overridden for a single valuation the same way; the result records that the override was used in place of the registry value.
Discounted cash flow
Reported as a sanity band on the earnings methods, never the method that drives the number — its inputs are assumptions nobody can observe rather than comparables from real sales.
How the cash flow is built
Starting cash flow is EBITDA less maintenance capital spending, which is approximated by depreciation and amortisation — the assumption is that a business must keep reinvesting roughly what it depreciates. That cash flow is grown at a constant rate for the projection period, discounted back to today, and a terminal value (the final year's cash flow times the terminal multiple) is added, also discounted back.
The low and high of the band come from re-running the same projection at the discount rate ±5 points — not from varying growth or the terminal multiple — because for a single-unit franchise the discount rate is where most of the method's real uncertainty sits.
Default inputs
A 25% discount rate and 2.5x terminal multiple are the starting assumption for a typical single-unit franchise — deliberately high next to a public-market discount rate, reflecting small-business and single-location concentration risk. All four are editable in the calculator.
| Input | Default | Allowed range |
|---|---|---|
| Projection years | 5 | 3–10 |
| Annual growth rate | 2% | −30% to 40% |
| Discount rate | 25% | 5%–60% |
| Terminal multiple | 2.5x | 0–10x |
Asset value: a floor, not a competing estimate
A buyer will not pay less than the cost of the assets they receive, however weak the earnings are — so this method is never blended into the concluded value on its own weight, only used to lift the bottom of the range if it falls below.
- Asset figures are treated as current value, not original or depreciated book cost — that judgment call is on the person entering them.
- The low end of the asset band assumes furniture, fixtures, equipment and leasehold improvements recover about 75% of stated value in a sale; inventory and deposits are assumed to recover in full.
- Checked against what it would cost to open a new unit from scratch — the brand's build-out cost range plus its initial franchise fee, times the unit count — as a sanity ceiling, not part of the valuation itself.
- If no earnings method produces a usable result, the concluded value falls back entirely to asset value.
What comes off in dollars, not through the multiple
One-time capital obligations are deducted after the range is built, rather than baked into the multiple as an ongoing risk discount.
- Required remodel — a franchisor-mandated remodel due shortly after the sale, if entered.
- Deferred maintenance — repairs the current owner has put off, if entered.
- Franchisor transfer fee — the brand's registry value, or an override, included automatically whenever it is greater than zero.
If total deductions run past a quarter of the indicated value, the result flags it — obligations that large are usually negotiated directly rather than taken off the headline price in full.