What method did 1 800 Packouts use to value the franchise agreements acquired?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
Trade names were valued using a relief from royalty discounted cash flows method. Franchise agreements were valued using an excess of earnings discounted cash flows method. The estimated useful lives of trade names is 15 years, franchise agreements is 13 to 15 years, and goodwill is 10 years.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts' 2025 Franchise Disclosure Document, the company used the excess of earnings discounted cash flows method to value franchise agreements. This valuation method is a standard approach in business valuation, particularly for intangible assets like franchise agreements. The estimated useful lives of these franchise agreements are between 13 to 15 years.
In addition to franchise agreements, 1 800 Packouts also values trade names using a relief from royalty discounted cash flows method, with an estimated useful life of 15 years. Goodwill is amortized over a period of ten years. These intangible assets are amortized using the straight-line method over the estimated useful life of the asset acquired.
For prospective franchisees, understanding these valuation methods is crucial because it sheds light on how 1 800 Packouts assesses the worth of its intangible assets, which include the franchise agreements that franchisees will be operating under. The valuation and amortization periods can affect the company's financial statements and may provide insight into the expected long-term value and sustainability of the franchise system.