May 1, 2026
How do restoration franchise owners determine enterprise value at exit? Restoration franchise company valuation requires adjusting EBITDA for franchise fees, owner compensation normalization, and transferability factors — then applying the appropriate multiple based on owner-dependency, financial transparency, and management team quality.
The Profit Detective Files is a series of case studies from 36 years of restoration business diagnostics. Details are changed to protect client confidentiality. The numbers and the outcomes are real.
Twenty-two years with his DKI franchise. Built to $3.8M in revenue, won awards, trained people who went on to run their own operations. He was 61 and ready to think about what came next. “I think it’s time,” he said. “But I don’t know what I have. I’ve never tried to value it.” I told him we’d find out together.
His 7% royalty + 2% marketing fee = $342,000/year in franchise system costs. Running two scenarios — franchise-in (fees stay as costs) vs. franchise-out (fees added back) — produced a $1.0M-$1.7M difference in valuation. That strategic question was worth answering before listing.
He paid himself $180,000. A market-rate operations manager would cost $95,000-$110,000. The $75,000 delta is an add-back to EBITDA — profit routed through owner comp. Adjusted EBITDA (franchise-in): $295,000. Franchise-out: $637,000.
He personally managed 70% of commercial relationships and was primary estimator for all jobs above $25,000. Instead of 4-5x EBITDA for a well-structured company, his owner-dependency pulled the multiple to 3-3.5x. Franchise-out at 3.5x = $2.23M vs. franchise-in at 3.5x = $1.03M.
He didn’t sell immediately. Two-year plan: distribute commercial relationships across his ops manager and senior PMs; develop a second estimator for jobs up to $50,000; explore franchise buyout economics; engage an M&A advisor for a quiet market test. He sold 26 months later at a valuation 40% above what he’d have received on day one — and earned better margins during the preparation period. He got paid twice.
Franchise fees are typically treated as ongoing operating costs in a franchise-in scenario and as potential add-backs in a franchise-out scenario. The treatment significantly affects EBITDA and therefore purchase price.
A right of first refusal gives the franchisor the contractual right to match a third-party purchase offer before the franchisee can sell to that third party. It complicates but does not prevent the sale process.
Mike McCabe is The Profit Detective — a 36-year restoration industry veteran who built and sold his own DKI franchise company. He advises restoration owners on succession planning, enterprise value building, and exit preparation.
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