Business for Sale, Would I Buy It? | Pest Control Franchise

In today’s version of “Would I Buy This Business”, we have a pest control franchisor. Oh, franchisor. Okay. 805k SDE, 1,000,000+ recurring revenue, high growth. So a franchisor, if they use the right word and hopefully they did, is the company that sets up a franchisee. So they’re the parent company. They tell you how to operate. They sell you the territory you’re gonna work in. They provide marketing and the brand name. And basically, you get the territory you get the exclusive rights to operate that business in the area that you’re paying to operate. And they give you help and coaching and maybe send clients your way. And then in exchange for that, you pay them a fee upfront to become a franchisee. And then you pay them a royalty, usually somewhere between 5 and 8% of your sales every month or every quarter, for being in their system. So assuming they’re using the words right, it sounds like they are not a franchisee but a franchisor of whatever this is called, bugs-r-us, hmm okay. 

So let’s see. The asking price is 3.2 million. Gross revenue is 2.17 million. Not even a – oh no, asking price 3. So asking price is four times exactly multiple of their cash flow. And their cash flow is about 40%. So let’s see. Yeah, says the company is a franchisor in 28 city service areas. Offering affordable pest control services for insects and wildlife. Began in 2012, franchising since 2016. Customer makes 60% commercial 40% residential. Corporate owns three of the locations. 36% SDE. 11 billion-dollar industry. If they’re saying they’re in 28 cities and they own three of them, that means there’s 25 franchisees or franchise locations. Some franchisees might own more than one. But I mean if this model is working and the profits are there and they could expand to 100 locations or 200 locations then it sounds like a good business. If some of the franchisees are failing, not paying royalties, that’s been really hard to get more franchisees or locations are closing, then, you know, obviously, that’s a different story. If you can make it work as corporate locations you might wanna work open more corporate locations and back off on the franchising. Or take over existing franchisee locations from the corporate level if they’re not doing well or not running it the way they should. But everything’s going well. It sounds like it’s a pretty good business. Margins are good. The price is, you know, again a little high but depending on the growth opportunity that might make sense. I would definitely consider looking into this further. And seeing what the opportunity is for growth. That’s really the key to this business, how many more franchise locations you can sell. And how well those can do, how much they’re gonna each be paying you in royalties. If you can figure that out, this could be a really solid business to buy.

More about this series, CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses up for sale and see if Matt would be interested in buying them.