To assign a valuation multiple for Marco’s Pizza, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the pizza franchise industry’s selling price multiples to determine Marco’s Pizza’s resale value.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.31
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.34
Over $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.86
When you go to sell a MOD Pizza franchise based on the median multiple of 0.31 and net sales averaging $979,121 between 2019 and 2020, it would sell for $303,527. This is almost a third of the midpoint initial investment of $903,000 which is not a great resale value.
Normally, one is encouraged to own multiple franchises to realize greater profits from a resale. In the case of the MOD Pizza franchise, owning multiple outlets will not guarantee you a profit from a resale. This is because the initial investment cost is very close to the annual average net sales from a MOD Pizza franchise. From our analysis, even if you own 50 franchises you are not guaranteed to make money from a resale. Hence, owning a MOD Pizza franchise should be a long-term investment.