Mergers & Acquisitions

M&A Talk Podcast

M&A Talk is the #1 podcast on mergers & acquisitions. At M&A Talk we bring you exclusive interviews with experts in business sales, valuations, mergers and acquisitions, and more. We talk to the most experienced professionals in the industry to uncover their secrets.

Insider Advice on Selling a Multi-Unit Business or Franchise

Insider Advice on Selling a Multi-Unit Business or Franchise

John Berg

M&A Attorney Specializing in Multi-Unit Franchising

Attorney and franchise specialist John Berg joins us to talk about multi-unit businesses and franchises. John guides franchisees and independent business owners through their strategic planning and daily operational issues and he shares his insights with us around financing sources, complex transaction demands, succession and transition planning for owners of multi-unit businesses, and the unique legal aspects of managing a franchise or multi-unit business. We also look at the challenge posed by managing rising labor costs in the multi-unit restaurant industry. If you are involved with a franchise, or want to be, then this discussion is for you.

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Guest Profile

John Berg is a shareholder at the law firm of Monroe Moxness Berg and counsels buyers and sellers on effectively structuring and documenting transactions involving business combinations, purchases and sales, and financing. John also leads the firm’s Multi-Unit Succession and Transition (MUST®) group, working with multi-unit retail business owners to help them solve the unique legal challenges in structuring their exit plans. 

John works closely with franchisors, lenders, and vendors and is a frequent speaker on exit planning, taxes, and mergers and acquisitions at industry conferences and seminars. He has been honored by Franchise Times as one of franchising’s top 125 “Legal Eagles” (2004-2021), selected as a “Minnesota Super Lawyer” (2006-2021), and nominated to “Who’s Who Legal: Franchise 2020.”

Topics Covered

  • What is a multi-unit business or franchise? [3:20]
  • What types of buyers purchase multi-unit businesses? [3:55]
  • EBITDA multiples for multi-unit businesses [5:15]
  • What are private equity firms’ holding periods when they purchase a multi-unit business? [6:20]
  • Private equity firm hurdle rates (minimum required rate of return) [6:20]
  • Capital structure improvements for multi-unit businesses [7:30]
  • Examples of multi-unit franchises [8:20]
  • Scalability and margins of multi-unit businesses [9:15]
  • Overview of general and administrative (G&A) expenses [11:00]
  • Do venture capitalists invest in new multi-unit concepts? [11:45]
  • Geographic considerations for multi-unit businesses [12:40]
  • Scalability or profitability of multi-unit franchises [13:00]
  • The value of talking to other franchisees in the system (a.k.a. “validation”) [14:00]
  • Corporate units vs. franchisee-operated units [14:30]
  • Multiples for franchisors vs. franchisees [15:30]
  • How important is franchisee profitability to long-term franchisor success? [18:15]
  • Franchise Disclosure Document (FDD) — Item 20 — Outlets and Franchisee Information [20:10]
  • Overall consumer preferences and market dynamics and their effect on market valuation [21:30]
  • The corporate vs. franchisor decision to grow [24:30]
  • Is geographic concentration important for franchisors? [27:00]
  • Success rates of independent businesses vs. multi-unit or franchised businesses [28:50]
  • The impact of minimum wages on the franchised business model [30:30]
  • Typical costs for multi-unit franchises [33:00]
  • How important are operating metrics to buyers if EBITDA is still strong? [34:25]
  • Common EBITDA multiples for multi-unit businesses based on size and type — and the impact of predictability on EBITDA multiples [35:45]
  • Who purchases franchisor business models? [37:50]
  • Which are the most highly desired multi-unit franchises? [38:20]
  • What is a business combination? [39:45]
  • How often do private individuals vs. private equity firms invest in multi-unit franchises? [41:15]
  • I have between $10 million and $20 million to invest — should I consider investing in a multi-unit business or franchise? [41:50]
  • Are there rules of thumb for minimum EBITDA per unit? [43:50]
  • What are the characteristics of a good multi-unit business? [45:00]
  • Minimum revenue requirements per unit [48:30]
  • What are the most common legal issues in multi-unit M&A? [51:00]
  • Single vs. separate franchise agreements [53:00]
  • Do most multi-unit business owners prefer to own the real estate? [53:50]
  • How negotiable are franchise agreements? [55:05]
  • What are the most contentious issues in a franchise agreement? [56:30]
  • How much influence do franchise groups have over the franchisor? [58:25]
  • How does litigation affect a franchisor’s ability to sell new units? [59:30]
  • What is a workout? [1:03:25]
  • Who are the most difficult parties to negotiate with in a workout? [1:05:20]

Learn More



The Art of Selling a Business With $10 Million to $100 Million in Revenue

Written by Jacob Orosz, President of Morgan & Westfield

For a business to sell for what it’s really worth – or even more – you need to properly prepare. But too many entrepreneurs put off planning the sale of their business until the last moment. Acquired – The Art of Selling a Business With $10 Million to $100 Million in Revenue will help you prepare your business for sale and walk you through the sales process, dodging the pitfalls along the way. With a significant amount of your wealth tied up in your business, planning your exit is one of the most critical initiatives you’ll undertake.

Read more