Roto-Rooter buys its largest franchise for $60 million

Roto-Rooter has expanded its direct footprint by acquiring its largest independent franchise territory for $60.6 million, according to an announcement. 

The big picture: The deal marks the company’s sixth franchise acquisition of this year, continuing its stated strategy of acquiring franchises. 

• The transaction consolidates a large portion of the company’s California market, rolling under the corporate umbrella service coverage for approximately 11 million residents.

By the numbers: Before the acquisition, the franchise was generating between $50 million and $55 million in annual revenue, per the announcement. 

• According to president Robert Goldschmidt, the acquisition expands the reach of Roto-Rooter’s company-owned operations to about 75 percent of the U.S. population. 

Between the lines: In its latest quarterly earnings release, Roto-Rooter reported an adjusted EBITDA margin of 21.1 percent. 

• Applying that figure to the acquired franchise’s revenues implies an incremental EBITDA addition of roughly $10.5 million to $11.6 million, though the California franchise’s specific EBITDA figures weren’t publicly disclosed.

Zoom in: The now-company-operated territories include coastal and valley markets such as Sacramento, Northern San Diego, Palm Springs, Ventura, Bakersfield, Fresno, and Monterey.

Of note: Roto-Rooter has recently faced headwinds from rising paid digital advertising and customer acquisition costs, as Homepros previously reported. Roto-Rooter’s residential, company-owned branch revenue rose 1.7 percent year-over-year in the second quarter.