Case Study

Specialty Retail Bakery Restructures to a Franchise Model and Achieves EBITDA and Valuation Improvements



Client Situation

This company owned and operated 300-plus retail specialty bakery locations throughout the United States, principally located in retail shopping malls. Mall and customer traffic were declining due to discount retailers and fear of terrorism. Store profitability was adversely impacted and the overhead burden to maintain area and regional management to oversee operations of the stores became excessive, eroding EBITDA.


An experienced financial executive, now a E78 team member, was hired as corporate controller, to lead the development and execution of a new strategic plan. The new plan defined the need to restructure the company from owning and operating these specialty bakery stores to offering franchised locations. This process included a thorough analysis of each store to determine a sales price for potential franchisees that allowed for a profitable multiple to the company while allowing the franchisee to be financially successful without excessive capital outlay, resulting in an overall economically healthy franchise system. An analysis for restructuring operating and administrative areas was also completed, which lead to defining the optimum franchise load for number of operating personnel per franchised location.


This restructuring allowed the company to achieve an overall reduction in general operating expense and increased EBITDA, which provided a 30 percent increase in valuation when the company recapitalized its existing debt and equity structure.

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