Orkin Franchise Cost About The Same As Resale Value (2023)

Rollins, Inc. is a North American consumer and commercial services company. Through its subsidiaries, Orkin franchise, PCO Services (now called Orkin Canada), HomeTeam Pest Defense, Western Pest Services, Industrial Fumigant Company, TruTech, Critter Control, Crane, Waltham, OPC Services, PermaTreat, Northwest Exterminating, McCall Service and Clark Pest Control, as well UK subsidiaries Safeguard Pest Control, NBC Environment, Europest Environmental Services, Guardian Pest Control, Ames, and Kestrel, with Australian subsidiaries Allpest, Scientific Pest Control, Murray Pest Control, and Statewide Pest Control, and Singapore subsidiary Aardwolf Pestkare, the company provides pest control services and protection against termite damage, rodents and insects to over 2 million customers in the US, Canada, Mexico, Central America, the Caribbean, the Middle East, and Asia from over 500 locations.

In this article, we will look at Rollins’ American subsidiary, Orkin’s Franchises.

An Orkin Franchise is a business that provides professional pest control services and termite control services for residential homes and commercial and institutional buildings.

This industry comprises establishments primarily engaged in exterminating and controlling birds, mosquitoes, rodents, termites, and other insects and pests (except for crop production and forestry production). Establishments providing fumigation services are included in this industry.

When purchasing a pest control company, one of the biggest aspects to consider is what kind of established customer base you’re getting with your purchase; and keep in mind there will be some attrition during the transition period. You will be essentially buying customers along with inventory and human capital. Figure out how many services you’ll need each quarter to break even, and then how many you need to be profitable. Is this number above or below the number of customers you have to service? Additionally, you’ll want to pay close attention to customer retention rates. Does this potential company have a high turnover in its customer base, or is more secure and established. Generally speaking, a retention rate of over 70% is a good number.

High profit has also attracted new operators to the industry. A significant share of residential and commercial pest-control service revenue is driven by repeat customers. Environmental concerns have been playing a major role in the performance of operators. After the facilitation of vaccines, the economy is expected to fully return. Weather is an important component of industry demand. The rise in the stinkbug population is expected to continue during the period, driving demand for industry services. Profit has benefited from a decrease in fuel prices.

Depending on the size of the territory in which your franchise is located, the initial franchise fee will be between $39,000 and $100,000, which may be discounted if you elect, and Orkin agrees to, a term for your franchise agreement less than the standard terms set forth in Exhibit 7 of the FDD or if you operated a pest or termite control business (other than under an Orkin franchise agreement) prior to the signing of the franchise agreement. You have to pay this upfront fee when opening an Orkin franchise.

The estimated initial investment to begin the operation of an Orkin Franchise ranges from $84,975 to $231,200. This sum does not include the rent for the business location or other real estate costs or the costs of purchasing any existing customer contracts of their affiliate Orkin, LLC that may be in the territory assigned to you and that you are required to purchase from Orkin, LLC, which may cost in excess of $250,000. Of your estimated initial investment, between $39,000 and $100,000, plus the cost of purchasing such customer contracts, is payable to the franchisor. The following costs are part of the upfront costs included in the initial investment for an Orkin. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy an Orkin franchise in 2022.

The notes below are taken directly from the document we reviewed*.

Royalty: 7% of Monthly Total Net Revenues, plus possible gross-up for state or local taxes.

Advertising Fee: 2% of Monthly Total Net Revenues.

Local Marketing: 1% to 2% depending on your Annual Net Revenues.

Since Orkin does not provide financials, we will calculate the Average Unit Volume using available data. In the last year of reporting, the franchises brought in profits of $9,400,000. This amounts to a median profit of $18,762.

Based on the median sales provided by Orkin’s franchise locations, at the median profit, it will take around 10 years to recoup your investment. This is longer than other franchise opportunities. You may not get the median profit, which would elongate getting a return on your investment.

To assign a valuation multiple for Orkin franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.

From the median profit of $18,762, if we assume there is a 12.5% profit margin, the average revenue would be $150,096.

Under $5 Million Net Sales

Over $5 Million Net Sales

When you go to sell an Orkin franchise based on the median multiple of .97 and average revenue of $150,096, it would sell for $145,593. This is just lower than the midpoint investment of $158,087.

The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.

Orkin is a very profitable business for the franchisor, with retained earnings of $350 million in 2021. Compared to $203 million in 2019, they saw an increase of 72% from 2019 to 2021. This is a good indication of high growth as a company overall.

Over the last three years, the company has been in expansion. Both franchising units and company-operated stores have increased. Over the last three years, franchises have opened at a rate of 4 units a year. This is an indicator that these stores are performing well.

Orkin offers people the opportunity to be a part of a business that has a good resale value. While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Pest Control Industry.

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