You, of course, know who Ed Bailey is. He owns the Patrizio restaurants and the new Bailey’s Prime Plus. He’s also one of the biggest McDonald’s franchisees in the country — for now. Bailey is set to sell his 63 restaurants, probably by year’s end. Which got us to wondering what 63 McDonald’s might be worth. I asked someone who’d know. Here’s his back-of-the-envelope ciphering:
These types of franchises are typically valued at 5 to 6 times EBITDA. A McDonald’s unit will gross around $2.2. This is huge volume. The average sale per person is $3, and about 88 percent of that is the cost of sale. So 12 percent of $3 is 36 cents. That’s EBITDA per customer. 2.2 million divided 3 equals 733,333 customers per year. 733,333 times 36 cents gives you EBITDA of $264,000. $264,000 times 5 equals $1,320,000. Obviously there are many other factors, but $1.3 million is probably very close.
Let’s round up, then, and call it $80 million. To Ed Bailey, we say: nice.
Correction: The answer was correct, but the math was a bit hinky when I first posted this; it has been corrected.
