Acquisitions Anonymous - #1 for business buying, selling and operating - $1.8M Cash Flow Catching Raccoons? Inside This Wild Franchise Deal

Episode Date: March 7, 2025

A wildlife removal franchise doing $1.8M in cash flow? We break down this unique franchise opportunity and whether it’s a smart buy.Business Listing - https://www.bizbuysell.com/Business-Opportunity/wildlife-removal-franchise-with-corporate-and-royalty-income/2221496/🚀 Sponsors 🚀🔹 Edler Zain – The go-to CPA firm for entrepreneurs! Whether you need tax structuring, bookkeeping, or a fractional CFO, their Builders Package has you covered at a simple monthly price. Learn more: https://www.edlerzain.com/🔹 HoldCo Conference 2025 – The premier event for HoldCo operators! If you own multiple businesses or want to, don’t miss this intimate, strategy-focused event. Get your tickets now: https://www.holdcoconference.comIn this episode, the crew dives into a $1.8M EBITDA wildlife removal franchise headquartered in Dallas, Texas. The business started with corporate-owned locations before expanding into franchising, with units in multiple states. But does it make sense as a franchise? We explore the challenges of scaling a franchise model, the true costs of being a franchisor, and whether this business is actually worth its $4.9M asking price. Plus, our franchise expert Connor breaks down why most franchisors don’t cash flow until they hit 100+ units—a reality check for aspiring franchise buyers.Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

A lot of people just think, okay, I'm going to franchise this business and the franchise piece is going to kind of be my side hustle. And it really just doesn't work that way because it's a fundamentally different business and your priorities have to shift. Why should somebody buy a franchise like this? Or am I just like drastically oversimplified what it takes to catch a skunk? I think lenders would also have a really hard time with someone trying to buy a franchisor of any kind if they don't have a lot of franchising experience on their resume. If you have corporate stores that are financing your bootstrapping of a franchise or operation, I would imagine like the market for this is massive. You could have tons of territories, right?

You could open tons of units. I would think this would be a good business to franchise. Hello, another episode of Acquisition Anonymous. We don't have 100% beers anymore. And thumbs downing on just the plus inventory alone. Hello, ladies and gentlemen, boys and girls. Welcome back to another episode of Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses.

And have we got a good one today for you? This is a animal removal franchisor with corporate-owned locations. So if you've got raccoons in your chimney or bears in your crawl space, these guys will come out and remove them humanely. This business has $1.8 million of EBITDA. It seems like they started with a couple company-owned locations in Texas and have since started franchising. We are also joined by Connor, our franchising expert on today's podcast. So this was a really, really good one. Please enjoy this episode of Acquisitions Anonymous.

Today's episode is brought to by Good Friends of the podcast, Edler Zane. Edler Zane is the CPA firm for entrepreneurs. Not only have they supported over 100 acquisitions. entrepreneurs through quality of earnings and tax structuring, they also offer a full-stack CPA solution for business owners and operators called the Builders Package. The Builders Package covers all of your tax bookkeeping and fractional CFO needs at one simple monthly price. To learn more, go to their website at E-D-L-E-R-Z-A-N.com. That's Edler Zane and tell them we say you. Bill, I have horrible news. It's going to be a sad day for Heather

recording. It's a horse. We're doing a horse removal service today. A horse removal raccoons. I thought it was just raccoons. Oh, horses. But they're so cute. Yeah. There are several people on Twitter who love raccoons,

but Heather's not one of them. I don't know. Well, I am one of them. I just don't publicly say it. Now I'm publicly saying it. Publicly pro raccoon. Is this a franchise? Connor, did you bring us a raccoon franchise?

This one's weird because it's like a, it's a franchise. Like, this is the franchisor. They have corporate locations that do the raccoon removal, and then they've apparently, like, franchised it out themselves. I don't know. I love this. I love this. This has hair on it.

All right. That's the first raccoon pun. Here we go. Hey, oh. All right. Who's reading this one? Let's hear it. I want to hear it.

All right. This is off of Bizby sell. And, Connor, you do have to tell us after I read it why you found this exciting. If he was raccoons. Sure. All right, so it's a wildlife removal franchise with corporate and royalty income based in Dallas, Texas. And the photo, for those of you not joining us on YouTube, is two very cute but sleepy raccoons at the top of the listing. The asking price is $4.9 million.

It cash flows $1.8 million. Gross revenue is $6.2 million, and it has $15,000 in inventory. It was established in 2013 and it does not include an EBITA or furniture and fixtures number. It is an SBA approved deal with 20% down and it's an opportunity to own a famous franchise wildlife removal company with corporate locations throughout Texas and franchise locations that pay royalties in Texas, New Hampshire, Oklahoma, Michigan, Tennessee, and more franchisees adding locations. Total company income after all expenses from corporate locations and franchise royalties is over a million dollars. This is a growing company with more locations being added.

The entire company asking prices $4.9 million. 2024 sales and revenue have increased 30% year-over-year. In addition to critter removal, we are rapidly becoming the leader in the home service industry. We lead the way in the development of technology, education, products, and services for homes and businesses. We are a family-oriented business founded in Texas and dedicated to excellent customer service. You can sign the NDA to learn more. It is located in Dallas, Texas. They have 12 employees.

They have an office warehouse. And there is so much growth. The brokers are always recruiting new franchisees, 20% financing, and ongoing support and training is available for up to three months and more if needed. The reason for selling is retire. And it is listed by Sam Ali of Lone Star Business Advisors, I assume also out of Dallas. So, Connor, besides the cuteness of these raccoons, why did you flag this one? Well, I know nothing about this industry at all. So really can't speak to that.

But it sounds like, what this sounds like to me is somebody who had a multi-location business in the waste removal space and was like, oh, you know, what we should do? We should franchise this thing. as our side hustle. And it sounds like they have a handful of franchises that are doing that. But the reason I flagged it, we don't know how much revenue is coming on the franchisor side versus like the operating business. But there is no world in which franchisors trade for what multiple is that? 1.8 million in cash flow.

I guess under three times cash flow. And there's no world in which franchisors trade for that. So there's some hair here somewhere. So it's a great deal. It's a great deal. Connor. What a bargain. But I think that if we keep digging, a raccoon is going to jump out and bite us in the hand at some point. So we'll have to keep digging for that. So take a quick step back. Heather, Heather, what does this business do? Do you? I'm curious what your answer is. It seems like a few

things because at the end they said they're just this technology home services business, which does not seem to go along with, you know, critter removal. But I think it's mainly critter removal. So like we've we've hired folks like this for skunks, right? And they brought the cages and they come and try to get rid of the skunks. Or if you've got a family of raccoons living somewhere on your property or in your attic or something, they're going to come get rid of them for you. That's that. And actually, I did, I did know someone who owned a business like this. It was actually one of the places where I used to board my horses, the owners of the place, that was their business was this. And apparently they did very well, from what I could see.

So I think this can be a lucrative business, but that's what I think it is. This is who you call when you want to get rid of animals that are wild animals on your property. And so they come with like nets and trank guns and stuff and they take them way? Or cages that they put some kind of food in to try to trap them. I'm pretty sure I found which one this is.

And like the services that they list out are control and trapping service, exclusive wildlife inspection report. I don't know what's exclusive about a wildlife inspection report, but bird control services, fly control, attic restoration, rodent control. So, Bill, have you ever talked to one of the guys who like comes out and does this at your house? Oh, usually they're very entertaining. They are crazy characters.

And the thing I've noticed is like every single one of them has their own personal pet theory about what these animals most like to eat. like they'll come out and they'll be like oh raccoons they only like jiffy lightly nutted like peanut butter like they don't like creamy they only like the kind with like the small nuts and they don't like the big nuts they like the mildly nutted like peanut but but they're all different you know oh skunks they only like cheddar cheese and it can't be american cheddar cheese they want german cheddar cheese i are skunks like marshmallows who doesn't who doesn't right so So, all right.

So this business is a franchisor. It sounds like they started doing it in Texas. And they said, hey, I can train other people to wrestle raccoons and not get scratched. We're going to write a couple. We're going to write an FDD. And we're going to franchise this thing out. If they're cash flowing $1.8 million a year. So, Connor, does this margin profile even make sense for a franchisor?

Gross revenue of $6.2 million and cash flow, which was assumed as EBITDA of 1.8, I thought margins would be better than that. that. Yeah. So the big challenge here is that we don't know how much of that revenue and cash flow is coming from their operating business versus how much is coming from the franchisor. I have a theory about this, and my theory is that they started franchising, not knowing what they were doing, and they're absolutely hemorrhaging money on the franchisor side of things. And the reason I say that, part of the reason is if you look down that, so 12 employees is what they say, yeah, I would expect if you were doing $6.2 million and just sheer wildlife removal, that would be a lot more than 12 employees,

but it would make sense if you have 12 employees for a franchisor that has that many locations. But, you know, I mean, if they're only doing a million or $2 million in royalty revenue on the franchisor side of things, they're burning a lot of cash on that side of things. But again, they don't specify how much is on each side of the table here, which is what's tough to underwrite. Well, and I have not dug into the financials of franchisors, but what I understand in reading about it, Connor, is a lot of times franchisors, they have a durable source of revenue over time, but they go through a J-curve where early on, they have to invest to get franchisees up to speed. They got to pay franchise brokers to help recruit the franchisees. all that kind of stuff causes them to be in a position where early on in your franchising as a franchisor, you can burn some cash? I mean, does that potentially affect?

Well, I guess I just answered my question. These guys are 11 years old. They should be past that by now. Correct. Yeah. I mean, a lot of franchisors, it takes them to get to 100 units to get to what they call royalty sufficiency, which is when there's enough royalties coming in to actually fund, you know, the business. But yeah, they were going to burn a lot of cash in the interim of doing that, which that's what a lot.

A lot of people just think, okay, I'm going to franchise this business. And the franchise piece is going to kind of be my side hustle. And it really just doesn't work that way because it's a fundamentally different business. And your priorities have to shift. So, Connor, help me understand. So what you're functionally saying is that a franchise or does not cash flow until it has roughly 100 units. That is shockingly high to me. because my priors on franchisors is that they're some of the best businesses in the world.

They're really high margin. They trade for huge multiples. They're really great businesses. I didn't expect that the ramp would be nearly so big to get to 100 stores. I know, like, you've got to write the FDD. I know you got to kind of build out all the SOPs, but like that's mostly time, not like hard cost. And my priors also on kind of franchise brokers and how they work is that they take a huge, chunk of the franchise fee that is paid by the franchisee, but that money is just kind of money

the franchisor never gets. It's not money they've got to pay out of pocket. So where are all the expenses coming from that caused me to have to ramp to a hundred locations to offset them? Well, and by the way, that number is that's like if you're like, you know, in my judgment, like adequately investing into the organization and building out a team, I'm sure I'm sure that you can, you know, get by leaner than that. But that's not, you know, one that's going to grow really high. But the way to think about it is that there's an inverse correlation between the amount of support that a franchisee needs and the amount of revenue that they're providing for you as a franchisor. So on the front end, when franchisees are driving the least amount of revenue in the beginning, that's actually where they require the most amount of support and launch. And that's when the franchisor is going to be delivering the most amount of service to that franchisee.

And so both things here are true because, yes, you have to burn a lot of cash, you know, on the front end to account for that revenue delta. But also, to your point, yeah, they can be some of the best businesses in the world on the back end because as the franchisees, the units are scaling, they're driving more revenue. That means the franchisor is getting more revenue from them. But also they're maturing. And so they're requiring incrementally less and less support over time. And that's that point where they get to where they're making crazy money and trading for crazy multiples. Does that make sense? And is it just headcount that you need at the franchisor to support these guys?

It's mostly headcount. Head count and administrative costs. I mean, the ongoing legal expenses to keep franchisors, you know, current are a lot more than people would expect them to. But a lot of it just is personnel. It's branding and things like that. And is it legal? I know that the FDD, the FD is like,

one heck of a project to get published and have it be compliant and all that stuff. But that's, I feel like that's one time, although of course you've probably got to update it every year. Is that what's soaking up your legal is like constantly updating your FDD and making sure it's compliant? Or are you getting sued by your franchisees all the time? Well, you know, that's a factor, you know, for some down the road that's kind of off to the side. But like on an ongoing basis, yeah, there's the development of the FDD.

It has to be refiled every year. 13 states also have to have them filed at the state level. and, you know, every single state is going to want to see a tweak and they're going to want to send letters back and forth. And all of that has to happen every year. You know, every franchisee has to sign an agreement. And those agreements are going to be, you know, fairly standard, but there is going to be some, you know, some deviation there. So it's just a lot of paper and high stakes paper, lengthy paper, all of which is going to add up on the legal side of things. That sounds terrible.

I'm updating my priors on this being the best business of the world. Well, it can be. Yeah. I read a tweet, Connor, where somebody was like, basically home services businesses like this have no business being franchises. And like, well, A, I was curious what you think about that. Because to me, if I wanted to go get into the wildlife removal business, like, I'd get a domain name. I'd hire somebody on Upwork. And then, like, I would go, like, learn how to do this, which doesn't appear to be that hard.

I'd probably just go work for somebody else for a month and then know everything there is to know about trapping raccoons and skunks. Like, why should somebody buy a franchise like this? Or am I just like drastically oversimplifying what it takes to catch a skunk? No, I think you're on to something. I don't think I would buy a wildlife removal franchise. First of all, I don't want to deal with wildlife. But even if I did, I'm with you. I think that this is a business with a low enough barrier to entry where I just don't think that there's,

enough incremental value that a franchisor is going to add that justifies paying a royalty for it. In retrospect, I think the same thing about the first franchise that I bought was in window cleaning. Sure, there's some branding and some marketing components that come into that. But from a tactical, like, operational standpoint, there just isn't enough incremental value that I feel like the franchisor is added on an ongoing basis where that made sense. So I think that home services as a category is a lot too, it's too broad to paint with that big of a brush. to say that there's no home service that makes sense for a franchise. But I do think that there's a certain threshold of just complexity, barrier to entry, and like, you know, how valuable brand

awareness is to you, that all of that plays a role in whether or not a franchise can make sense on an industry standpoint. And then there's an entirely different conversation about whether or not it makes sense for the individual, because that, you know, that varies as well. Three years ago, Kelsey and I decided that we wanted to launch a conference. It was, it was in a space that nobody else was talking about yet, Holdco's. I only attended three live events last year and only one big conference,

and that was Holdco Conference. We ran two amazing events in Cleveland, one in 22 and one in 23. And after the event in 2023, we decided that we really had to take it up to the next level. We took a little bit of a break, we started looking for how could we turn this conference into something that a decade from now,

we can be proud that we launched it. Someone and some team needed to step up, and we're doing that. I'm partnering with Kelsey and John to host Holdco Conference in 2025. We're so excited to partner with Gurley and his team for Holdco Conf 2025. If you're somebody who runs a Holdco wants to run a Holdco in the future, isn't our

buddy named Matt Paulson who hates Holdco's because he has problems. And you want to learn how to manage multiple businesses at once, want to learn how to incubate companies. That's my joy. I like I love doing it. I'm excited to talk about it. And you want to connect with other people that are building portfolios of companies as a Holdco practitioner, then this is for you.

The big news is it gets to be a ski conference plus WholeCo Conf. So this conference is for folks that are building a holdco as their main strategy. So you're going to be incubating businesses. You're going to be buying businesses and you're going to be growing through holdcos. You should come to Utah next spring. We're not doing this like other conferences because frankly, I hate those other conferences. This is much more of a sense of camaraderie and very little of the let's get drunk and have a cocktail party and pretend it's progress type conferences that a lot of things are.

So space is limited. Get your tickets now. And we'd love to see you. It's going to be very small, very intimate, and filled with great people. Check out wholecoconference.com for more deeds. All right. Do you guys want to talk about the raccoon in the room? Yes.

Heather SBA approved. All right. With 20% down, which is interesting, because normally they like to tout the maximum leverage, which is 10% down. So they're at least saying with 20% down. But, you know, I'll start with there is no such thing as SBA pre-approved. If there's no buyer and there's no price, and obviously we don't even really know the financials here, there really is nothing to pre-approve. Perhaps they've talked to a lender and perhaps they've determined that the franchise agreement is eligible.

There is something kind of extra when you're looking at franchise businesses. I don't know how this applies, though, to a franchisor, to be honest. But with franchisees, the lender is required to read through the franchise documentation and make sure that the franchisees can be operated in, independently. If they have too much undue control by the franchisor, they're not eligible. If it's a franchisor here, maybe that doesn't apply. Maybe it's just fine. It's eligible. But whether anybody would lend on it depends on where this cash flow number comes from. Is that really adjusted EBITDA? Because adjusted EBITDA is what a lender will lend on. And I doubt that like Connor is saying that this is really the adjusted EBITDA, a million eight. They,

say a cash flow a million eight and down below in the body that i noticed they say that royalty revenue is over a million dollars so is it a million dollars or is it a million eight and is that you know fully loaded with expenses but that is ultimately how you figure out if you can put sba debt on the deal um you know and i think i think lenders would also have a really hard time with someone trying to buy a franchisor of any kind if they don't have a lot of franchising experience on their resume. This is not something where lenders would be okay with a first-time buyer that has a resume that's financial oriented or something like that. So if you're not a long-time listener to the pod, you will know that we constantly bag on SBA pre-approved for the reasons that Heather just mentioned. And it basically, when you read SBA

pre-approved in a listing, Heather, tell me if I'm off base here. What it basically means is there is nothing on the face of this business that would disqualify it from being for an SBA loan, meaning it's not a gambling business. It's not a money transfer business. It's not a pornography business. It's not in all the prohibited categories. Right. As such, it's pre-approved.

It's a little bit of that. It goes a little deeper than that because a lot of brokers will talk to an SBA salesperson, a lender at a bank, and they'll say, look at my SIM. would you write a letter that says this is pre-approved? And of course, what is the salesperson going to do? Oh, no, Mr. Broker, I don't want your business. They're going to write the letter with really minimal questions, analysis, or pushback.

So it's, of course, a non-binding letter. It's a non-binding letter. It hasn't gone through the bank's credit. Again, you don't have a buyer. You don't have a price. You don't have a structure. So there really was nothing really to do. There was nothing done.

And it's really truly SBA pre-approved is just marketing. It's not meaningful in any way. And they could even be wrong about eligibility, right? Because they probably didn't go that deep on that on SBA eligibility. It could be something in here that makes it ineligible that hasn't been looked into. I've just blown away. These people are making $1.8 million a year catching raccoons. Can we just talk about how amazing America is?

You can just go buy some cages and some peanut butter. And next thing, you know, you're making it one point. $8 million, 11 years later. Pretty crazy. I think it's because this is something people will pay whatever amount of money they've got to pay for, right? It's not something you're going to want to do yourself. If you've got to get rid of, you know, animals on your property, you're just going to call the local, the first one you can find and you're going to pay whatever they charge. That's what I think.

You're paying $250,300 for somebody to come out and set these traps. I mean, it's ridiculous. And we or may not catch them. You know. You can't, judging from the prices of the private equity owned electricians and age fact technicians and plumbers in my town, you can't pay less than $300 of trip charge for just about anything these days to come to your house. What I also thought was interesting was that they listed one of the services they provided as, what did they say, an exclusive wildlife report, I think it said. Exclusive wildlife. exclusive wildlife report.

So what I would bet this is is a lot of times, this could be one of two things, a lot of times if you're developing a commercial property, you sometimes are required for environmental review to get a certification that you're not going to kill off the yellow feathered loon that resides in the area and this is its habitat. So it's possible they come out to these properties

and provide an environmental report that, A, maybe we will not disturb the habitat and you can go ahead and develop this property. Or I also knew a friend who was under contract on a house and he refused to close until they set up bear cameras in the back for like three weeks to ensure there were no bears living on the property. So I could see them doing reports either to confirm, basically to confirm that there are no wildlife, either that will be killed by building this building or that is going to be living in your new backyard that will have to be removed at a later date. Yeah, that's what they say here.

They say, during the inspection, we'll check chimney, these vents, roof, insulation, attic, gutters, Eve, siding, brick, foundation vents, et cetera, to make sure that there's no wildlife in there. Yeah, that's, I don't know if we told you, but we started a new, we started a new podcast policy not to out the deals because Bill and I got in trouble. multiple times, including outing a cruise ship operator in Alaska. Which turned out to be some good radio, actually. Forget I said that then. Yeah, just don't say the name.

Got it. No, it turned out I've turned into cheese Nostodamus, Bill, because I was able to spot exactly where the cheese manufacturer was within like 30 miles. from the prior episode. Somebody emailed us. It was great. We love it, listeners, when you email us and say, actually, I bid on the business you guys were talking about.

Here's all the things you got right and here's the things you got wrong. We get several of those a couple times a month and we love them. So keep sending them. So does this business, so if you're going to bid on this business, you have to tease out the company-owned stores from the franchisor operations and attempt to allocate cost between the two, right? Assuming you can do that and assuming that this is profitable, but it's making $1.8 million a year, let's assume most of it's coming from the corporate side, but they're clearly making enough on the corporate side to totally offset whatever they may be losing on the franchisor side,

right? If net net, we're making $1.8 million here. Is this a good business to buy? I mean, if you have corporate stores that are financing your bootstrapping of a franchise or operation, I would imagine like the market for this is massive. You could have tons of territories, right? You could open tons of units. Your franchisee market is huge because you don't need a whole bunch of capital to get started. You don't have to buy a truck or build a restaurant. Well, maybe you got to buy a truck, but you got to buy a few cages.

I would think this would be a good business to franchise. Am I off base? It could be. I honestly think that the buyers for this business are just separate. They need to carve out the corporate side and franchise it or sell it to an existing franchisee or something like that because the franchisor as a standalone operation, that's where, Bill, I think your point is valid that it could be a good business. And I think ultimately the crux of that, because they're not very big, is whether or not their franchisees are currently doing well and making money. Because if they are, then, yeah, this could be the foundation of something that you could continue to take in scale. But if they're not, then again, if there's not going to be a lot of tailwind in terms of growing units and everything, again, this is just so beyond subscale, which is a really challenging place as a franchisor to be.

So the key then, Connor, is that you want to look through the franchisors economics and you basically want to see the income statements for the franchisees. And you want to see that all the franchisees are healthy businesses because that's the ultimate proof in the pudding. right? You're helping people start successful franchise businesses. And if you can do that, your franchisor is going to scale. And if you can't do that, it's not. That's exactly right. Yeah, if the franchisees aren't doing well and making money and then I think that's going to be a really tough headwind for them to grow and add additional franchisees, which that, you know, other than just like the existing franchisees driving more revenue, that's the main lever for growth that they have to pull. It's not like, you can't just like market more. And so, you know,

sell more services as a franchisor. It has to go through the franchisees. Makes sense. All right. We are coming up on the witching hour, which is the 25 minute mark of this podcast, which we've been told we need to shut up at 25 minutes and rate the deal. So what do you guys think? What else? Are you thumbs up, thumbs down? Heather, you want to go first? If it's really a million aid of cash flow and most of that is from royalties as a franchisor and thumbs up. Bill. I think I could be thumbs up on this because I agree that a lot

of home services businesses don't need to be franchised. But this one, like, you could probably group your liability insurance across all the franchisees, right? Because there's definitely liability. I got eaten. My face got eaten by raccoon. I'm definitely going to want some liability insurance, right? If I've got raccoons in my chimney or whatever, a lot of people also probably want to

be sure that those raccoons aren't going to be like taken out back and shot in the head, like Billy Bob probably will do. But if you're a reputable national brand, you know, is going to treat these animals right, and you can prove you've got a track record of caring for animals the right way and removing them humanely. I think I could see people paying to have this done by a national brand rather than by a billybop. Like I could see some differentiation there. I think this could make sense as a franchisor.

I like it. Yeah, I like it too. It feels very kind of serve pro to me, you know, that disaster kind of cleanup service that has franchised everywhere. It's good business to be in. So I'm a thumbs up to you. So, Connor, what do you think? Bill, there could be a bolt-on opportunity with a taxidermy business where you just sell like one big package, you know, premium pricing and everything.

That's right. I'm a thumbs up just because I'd like to see the SIM, but there's a lot more hair to unwind. But I think it's, yeah, it's really, really interesting and would love to learn more. All right. We like it. Very rarely do we see franchisors we like on this one. Yeah, watch out raccoons. We're coming for you.

Sorry, raccoons. This is awesome. All right, everybody. We'll catch you next week. Thanks for being here.