What factors could influence the value of 1 800 Packouts' goodwill, net?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
isition during the period from inception through December 31, 2021:
| _ | Five Star | Connect | Got | tcha Covered | Bio One | |
|---|---|---|---|---|---|---|
| Cash | $ | 184,570 | $ 230,525 | $ | 344,031 | $ 25,815 |
| Accounts receivable | 163,663 | 97,386 | 248,099 | 465,507 | ||
| Contract assets | 333,973 | - | 25,960 | 111,755 | ||
| Other assets | 605,948 | 389,315 | - | 4,192 | ||
| Trade name | 2,020,000 | - | 2,050,000 | 12,500,000 | ||
| Franchise agreements | 1,630,000 | - | 1,280,000 | 15,000,000 | ||
| Goodwill | 5,327,767 | 9,233,140 | 2,107,506 | 24,292,677 | ||
| Liabilities assumed | (764,309) | (101,366) | (32,010) | (7,393,447 | ||
| Total purchase price | $ | 9,501,612 | $ 9,849,000 | $ | 6,023,586 | $ 45,006,499 |
Each of these transactions have been accounted for as a business combination using the acquisition method and the operations of the acquired entities have been consolidated with the operations of the Company as of the respective dates of the transactions. The Company has made certain measurement period adjustments to the valuation of purchase consideration for the 2021 acquisitions of Gotcha Covered and Bio One resulting in an approximately $1,500,000 increase and a $25,000 decrease to goodwill, respectively. These measurement period adjustments have been made in 2022.
The assets acquired and li
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts' 2025 Franchise Disclosure Document, the value of goodwill recognized in connection with business transactions is influenced by several business factors. These factors include the ability of the company to grow, which is supported by additional capital and the strategic expertise provided by the new ownership group. Goodwill and intangible assets, as of December 31, 2024, were valued at $52,556,496 and $45,678,810, respectively. As of December 31, 2023, goodwill was valued at $66,184,756 and intangible assets were valued at $50,358,496.
The FDD also mentions measurement period adjustments impacting goodwill. For instance, adjustments to the valuation of purchase consideration for the 2021 acquisitions of Gotcha Covered and Bio One resulted in an approximate $1,500,000 increase and a $25,000 decrease to goodwill, respectively, in 2022. These adjustments reflect how re-evaluations of acquired businesses can alter the initially recorded goodwill.
Furthermore, the settlement of a legal agreement related to the 2022 acquisition of 1-800 Packouts, LLC (Packouts) also affected goodwill. The company received a $10,000,000 settlement for claims related to breaches of franchise-related representations and warranties by the former owner. This settlement was treated as a reduction in the purchase price and the acquired assets, influencing the overall goodwill calculation. The estimated useful life of goodwill is 10 years.