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Ilhan Geckil

Ilhan Geckil

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Ilhan Geckil is a Managing Director at Econ One Research, Inc.  He has over 20 years of experience in the areas of corporate finance, valuation, ...
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Krista Holt

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Phillip Johnson is an expert with extensive experience in the complex and sophisticated analyses required in antitrust, class action, and ...

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Hal Singer Hal Singer is an expert in antitrust, consumer protection, and regulation. He has researched, published, and testified on ...
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Marc Martos-Vila

Marc Martos-Vila

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Franchise Valuation

The generally accepted methods by valuation professionals and experts can be categorized under three main approaches: (i) asset-based, (ii) market-based, and (iii) income-based. Regardless of what valuation approach we take, it is critical to have a good understanding of the subject franchise business including the franchise business model and franchise agreement. The industry along with company-specific factors, e.g., product portfolio, capital structure, leverage, profitability of the company, and risk factors, that determine the value of the subject company and/or asset(s), including franchise rights or distribution rights are also important considerations.

The value of any asset is routinely defined as the price a willing buyer would pay to a willing seller, in an arm’s-length transaction, where both parties have adequate information. This definition of “market value” is used widely in business, finance, and law, and is the basis of value used in our valuation studies. This definition is very close to the legal definition of “fair market value,” established in the Internal Revenue Code by RR 59-60.  Furthermore, this definition is widely incorporated in business valuation standards and in writings of valuation authorities.

The valuation approach and methodology that we employ varies based on the industry such as: discounted cash flow models for the income approach, valuation multiples methods, such as trailing twelve-months (TTM) gross profit multiples for alcohol beverage distributors (beer, wine, and spirits wholesalers), and EBITDA multiples for auto dealerships, for the market approach.

Valuation estimates using the market and income approaches should be very close to each other if done properly (assuming the use of a complete set of data), “true” comparable transactions, and comprehensive analysis. Each valuation approach should represent a good estimate of the amount a willing buyer would pay to a willing seller in an “arm’s-length” transaction.

Econ One’s team of experienced franchise valuation experts have experience valuing franchises across numerous industries. Our experience and expertise result in Econ One being a trusted partner in navigating the complexities of franchise valuation.