Franchise valuation multiples in Canada — by industry and unit size
What's your franchise worth? Most Canadian franchises trade for 2–5× normalized EBITDA, but the right multiple depends on the brand, the unit's track record, the lease, and dozens of other factors. Here's how the math actually works.
One of the most common questions franchise owners ask Summit is: "What's my franchise worth?" The honest answer is "it depends" — but there are well-established ranges that help frame the conversation. This article walks through how franchise valuations actually work in Canada, what multiples apply to different industries, and the factors that move your specific unit up or down within the range.
The two main valuation methods
Franchise units in Canada are typically valued using either of two approaches:
- EBITDA multiple — Earnings Before Interest, Tax, Depreciation, and Amortization, multiplied by a market-based factor
- Sales multiple — Annual gross sales multiplied by a smaller market factor
EBITDA multiples are more common for established profitable units. Sales multiples are sometimes used for newer units (where EBITDA isn't yet meaningful) or where franchisees keep imperfect books.
What is "normalized" EBITDA?
Your tax-return EBITDA isn't the same as your "normalized" EBITDA. The buyer wants to see what the business would generate if THEY ran it — so you adjust for owner-specific items:
- Excessive owner salary (add back the portion above market for a manager)
- Family members on payroll who don't actually work (add back)
- Personal vehicles, phones, travel run through the business (add back)
- One-time expenses (legal disputes, equipment failures, COVID closures)
- Depreciation methods that don't reflect economic reality
A normalized EBITDA can be 30–60% higher than the tax-return EBITDA for many small franchise units. Conversely, some unprofitable units show modest EBITDA only because the owner is taking a low salary — buyers normalize the salary upward to market and the EBITDA drops.
Typical multiples by Canadian franchise type
QSR (Quick-Service Restaurant) — 2.5× to 4× EBITDA
Tim Hortons, Subway, McDonald's, A&W, Mary Brown's, Pizza Pizza. Strong brands with established demand. Top-performing units in great locations can trade above 4×; weaker units or units with short lease remaining trade below 2.5×.
Full-service restaurants — 2× to 3.5× EBITDA
Boston Pizza, Swiss Chalet, Montana's BBQ, Original Joe's, The Keg, Kelsey's. Lower multiples than QSR because of higher operational complexity, labour intensity, and capex requirements.
Coffee shops (Tim Hortons + competitive) — 3× to 5× EBITDA
Strong brands with high-frequency customers and predictable revenue trade at the top of the QSR range. Tim Hortons resales in particular often clear 4–5× EBITDA because the brand's resale market is liquid and well-established.
Convenience stores + fuel — 4× to 6× EBITDA
Circle K and similar formats with attached fuel command higher multiples because of asset value (fuel inventory + equipment) and stable cash flow.
Service franchises — 2.5× to 4× EBITDA
Cleaning, home services, pet care, automotive services. Multiples depend heavily on recurring revenue (residential maintenance contracts trade higher than one-time service).
Specialty retail — 2× to 3× EBITDA
The UPS Store, mall-based retail franchises. Multiples reflect specific challenges of retail (rent, foot traffic, inventory).
What pushes YOUR unit up or down within the range
Two units in the same brand can trade at different multiples. Factors that drive yours higher:
- Growing sales — buyers pay more for trajectory
- Long lease remaining — 7+ years is ideal
- Recent equipment refresh — buyer doesn't need to spend in year 1
- Strong management team in place — reduces transition risk
- Multiple-unit operator interest — strategic buyers pay more
- Clean books that survive due diligence
Factors that push yours lower:
- Declining sales
- Short lease remaining (under 3 years)
- Old equipment due for replacement
- Pending franchisor remodel mandate
- Soft local market (population decline, retail decline)
- Owner-dependent operations (no manager who can run without you)
Worked valuation example
QSR franchise unit with $1,200,000 annual sales and $200,000 tax-return EBITDA:
- Tax-return EBITDA: $200,000
- Owner salary add-back (above $80k market manager salary): +$40,000
- Personal vehicle add-back: +$8,000
- One-time legal cost add-back: +$5,000
- Normalized EBITDA: $253,000
- Multiple (QSR mid-range, growing sales, 7-year lease): 3.25×
- Indicated valuation: $822,000
What buyers actually pay vs valuation
Valuations are the start of negotiation, not the end. Strong demand at the time of listing, multiple competing offers, or a unique location can push final sale price 10–20% above valuation. Soft demand, lender conservatism, or aged inventory can pull it 10–20% below.
Where Summit helps
Summit Franchise Specialists prepare normalized EBITDA reconciliations that hold up to buyer scrutiny, identify the right multiple range for your specific unit, and run the deal process from listing through close.