What does 'Adjusted EBITDA' mean in the context of the Brightstar Care Franchise Agreement Addendum?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
terms (including renewal options) as the lease.
If we (or our designee) elect to purchase the Agency's business and related goodwill under this Section 14.3, the purchase price will be equal to the greater of (a) one-and-one-half (1.5) multiplied by the Agency's Adjusted EBITDA (defined below) during the twelve (12) full calendar months immediately preceding the effective date of termination or expiration of this Agreement and (b) One Thousand Dollars ($1,000) for each active client of the Franchised Business as of the effective date of termination or expiration that is fully and effectively transferred and transitioned to us (or our designee) as part of our purchase.
"Adjusted EBITDA" means EBITDA (i.e., net income before interest, taxes, depreciation and amortization) plus adjustments for (1) nonrecurring related revenue or expense activities, (2) profit attributed to one-time or short-term business opportunities resulting from National Account participation or local contracts where business is not expected to continue for longer than twelve (12) months (shortterm staffing that is other than COVID-specific staffing will not be used as an adjustment unless it represents more than 20% of the Agency's trailing twelve (12)-month revenue, (3) add-backs for owner discretionary expenses and compensation that will not continue offset by fair-market replacement cost for the owner's day-to-day participation, (4) client price adjustments that have not been fully reflected in trailing results, (5) business expense activities that are not fully reflected in trailing results, and (6) expenses that would have been incurred had the Agency been in full compliance with this Agreement before
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 81–92)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, 'Adjusted EBITDA' is a financial metric used to determine the purchase price of an agency if Brightstar Care (or its designee) elects to purchase the agency's business upon termination or expiration of the franchise agreement. The purchase price will be the greater of (a) one-and-one-half (1.5) multiplied by the Agency's Adjusted EBITDA during the twelve (12) full calendar months immediately preceding the effective date of termination or expiration and (b) One Thousand Dollars ($1,000) for each active client of the Franchised Business as of the effective date of termination or expiration that is fully and effectively transferred and transitioned to Brightstar Care (or its designee) as part of the purchase.
'Adjusted EBITDA' starts with the standard EBITDA calculation (net income before interest, taxes, depreciation, and amortization). Then, it includes several adjustments to reflect the true ongoing profitability of the Brightstar Care agency. These adjustments account for nonrecurring revenue or expenses, profits from short-term business opportunities (excluding most short-term staffing), owner discretionary expenses and compensation, client price adjustments, business expense activities, and expenses related to compliance with the Franchise Agreement.
For a prospective Brightstar Care franchisee, understanding this definition is crucial. It dictates how the agency will be valued if Brightstar Care decides to buy it back. The adjustments to EBITDA can significantly impact the final valuation, so franchisees should pay close attention to how these adjustments are calculated and documented. For example, accurately tracking owner discretionary expenses and ensuring compliance with the franchise agreement are important for maximizing the agency's value. The franchisee should also be aware that short-term staffing revenue may or may not be included in the Adjusted EBITDA calculation depending on its proportion of the agency's total revenue.