Ozone Park Restoration Franchise – $3.2M Revenue, Strong Referral Network
Full acquisition analysis: financials, market context, valuation, risk assessment, and 100-day integration plan.
View Original Listing ↗At a Glance
Full-service restoration and specialty cleaning franchise serving Queens, Brooklyn, Manhattan, and the Bronx with water/fire restoration, mold remediation, odor removal, and reconstruction. Revenue sourced primarily through referral relationships with property managers, contractors, and professional partners rather than insurance work. Reported SDE of $638,949 (20.2%) appears understated; reconstruction shows Est. SDE of $876,071 (27.8%) after adding back $150K owner salary, $12.6K depreciation, and normalizing overhead. Franchise brand provides systems and national recognition, but NYC regulatory complexity (multiple license categories, mold certification requirements) and skilled labor shortages create operational challenges. Asking $1.5M (2.3x revenue, 1.7x Est. SDE) sits 15-20% above fair value for a business with concentration risk and transfer execution concerns.
Key Strengths
- Strong revenue scale at $3.2M with healthy Est. SDE margin of 27.8% after reconstruction vs. reported 20.2%
- Referral-based customer acquisition model reduces marketing costs and demonstrates trust from professional network
- National franchise brand provides operational systems, training, and brand recognition across four NYC boroughs
- Recession-resistant essential services (water damage, fire restoration, mold) with consistent demand drivers
- Serves both residential and commercial segments across high-income market (avg. household income $114,868)
- Skilled technician team in place with proven operational systems for efficient project delivery
- SBA-eligible with strong cash-after-debt of $657,476 annually supporting acquisition financing
Key Questions
- What is the breakdown of revenue by service line (water restoration, fire, mold, reconstruction, roofing)? Which lines drive profitability?
- Provide detailed customer concentration: Top 10 customers by revenue, relationship tenure, contract terms, and referral source categories
- List all required licenses/certifications: NYC DCA contractor license, NYS mold licenses (assessor/remediator), Home Improvement Contractor license, insurance policies with coverage limits and premiums
- What is the technician headcount, average tenure, age distribution, wage rates, and retention challenges? Any pending retirements?
- Detail the franchise agreement: Territory exclusivity, royalty structure, transfer approval process, training/support, marketing fund contributions
- Provide 3-year financial history showing revenue trend, margin evolution, and seasonal cash flow patterns by month
- What is the facility lease structure: Square footage, monthly rent, term remaining, renewal options, transfer requirements?
- List all major equipment/vehicles: Age, condition, replacement schedule, total insured value, and any outstanding liens
- What percentage of projects are insurance-funded vs. direct-pay? Average project size by service category?
- Detail owner involvement: Hours per week, key relationships owned personally, critical operational responsibilities that don't transfer easily
Reconstructed P&L
| Line Item | Amount | % Revenue | Benchmark |
|---|---|---|---|
| COGS (Materials) | –$947,050 | 30.0% | Industry avg: 30.0% |
| Direct Labor | –$1,104,891 | 35.0% | Industry avg: 35.0% |
| Gross Profit | $1,104,891 | 35.0% | Calculated |
| Vehicle / Fleet | –$94,705 | 3.0% | Industry range: 2-5% |
| Insurance (GL, WC, Auto) | –$78,921 | 2.5% | Industry range: 2-4% |
| Office / Admin / Software | –$63,137 | 2.0% | Industry range: 1-3% |
| Marketing | –$31,568 | 1.0% | Industry range: 0.5-3% |
| Rent / Facilities | –$63,137 | 2.0% | Industry range: 1-4% |
| Other Overhead | –$47,352 | 1.5% | Industry range: 1-3% |
| Depreciation | –$12,627 | 0.4% | Industry range: 0.3-0.5% |
| Owner Salary Add-back | $150,000 | 4.8% | Est. for $3M+ revenue business |
| Depreciation Add-back | $12,627 | 0.4% | Non-cash expense |
| Est. SDE | $876,071 | 27.8% | Target: 25-30% |
| EBITDA (Est.) | $726,071 | 23.0% | Benchmark: 15–20% healthy |
| Estimated SDE | ~$876,071 | 27.8% |
SBA Financing Model
Estimated SDE of ~$876,071 can support SBA 7(a) debt service on a $1,500,000 acquisition. Assuming 10% down ($150,000) and a 10-year term at ~10.5% SBA rates, annual debt service is approximately $218,595. Estimated pre-tax income to owner: ~$657,476+ after debt service.
Cash Flow Reality Check
Cash Conversion Cycle
Working Capital Recommendations
- Establish $400K Revolving Credit Facility: Secure business line of credit to fund peak summer working capital needs (Jun-Aug) when revenue spikes 15% above average. Avoids cash flow gaps during high material purchase periods and supports 45-day A/R cycle.
- Implement Milestone Billing on Large Projects: For reconstruction projects >$50K, structure payment terms as 30% deposit, 40% at midpoint, 30% at completion. Reduces cash conversion cycle from 45 days to 20-25 days and funds material purchases with customer deposits.
- Build Q4 Cash Reserve for Winter Operations: During peak season (Jun-Aug), set aside 10-15% of cash flow ($65K-$100K) to fund Q1 overhead and maintain technician payroll during 15% winter revenue decline. Prevents working capital crunch in Jan-Feb.
- Negotiate Net-30 Supplier Terms with Franchise Leverage: Use franchise buying power to extend material supplier payment terms from net-15 to net-30. Extends days payable from 25 to 30-35 days, reducing cash conversion cycle by 5-10 days and freeing $50K-$75K in working capital.
- Accelerate A/R Collection with Insurance Partnerships: Develop TPA/insurance carrier relationships with direct billing (paid in 15-20 days vs. 45-day property owner terms). Shifting 30-40% of revenue to insurance-funded projects improves cash conversion by 20-25 days.
How Sticky Is the Revenue?
Customer Concentration (Est.)
Revenue Retention Estimate: 70-80% of revenue from repeat property managers and contractor referrals; emergency restoration work is event-driven (water damage, fire, mold discovery) creating recurring relationship value even if individual projects are one-time.
Estimated percentage of revenue retained after an ownership transition, based on industry benchmarks and business characteristics.
Churn Risk Factors
What's This Business Worth?
| Method | Low | Mid | High |
|---|---|---|---|
| Revenue Multiple | $1,141,465 | $1,262,333 | $1,420,675 |
| SDE Multiple | $1,314,107 | $1,489,221 | $1,664,336 |
| Asset + Goodwill | $1,200,000 | $1,300,000 | $1,400,000 |
Premium Factors
Discount Factors
Market & Comparable Transactions
The $215B+ US restoration industry is consolidating rapidly as PE-backed platforms (BluSky/Kohlberg, Signal Restoration) acquire fragmented local operators. NYC market shows strong fundamentals: Ozone Park avg. household income of $114,868, 54% homeownership, median property value $877,496, and 4% unemployment create solid demand across residential/commercial segments. However, 60,020+ national competitors and 200-400+ estimated local players intensify competition. Major franchise networks (SERVPRO, ServiceMaster Restore) hold significant share, while independents compete on relationships and specialized services. NYC regulatory complexity (DCA contractor license, NYS mold certification, HIC license requirements) creates barriers to entry but also compliance burden. Critical labor challenge: 45% of firms report project delays from worker shortages, average construction worker age 42.5 years, only 16% under 35, and wages rising 4%+ annually with some firms raising pay 20%+ to compete for talent. Restoration industry characterized by recurring event-driven needs (water damage, fire, mold) providing recession resistance, but execution depends heavily on skilled technician availability and insurance/property manager relationships.
| Comparable | Revenue | Multiple | Location |
|---|---|---|---|
| American Restoration Operations (top 10 national provider) sold by Soundcore Capital to Morgan Stanley Capital Partners | Not disclosed | Not disclosed | Multi-regional (Dallas HQ) |
| Signal Restoration acquired Sentinel Group (emergency response, mitigation, reconstruction specialist) | Not disclosed | Not disclosed | NY/NJ/CT Tri-State |
| ATI Restoration acquired Kress Restoration (fire, smoke, storm, water, mold services) | Not disclosed | Not disclosed | Regional |
Bull Case
Buyer with restoration experience captures full Est. SDE of $876K (27.8% margin) and grows revenue 15-20% annually by: (1) Expanding territory into adjacent boroughs with franchise exclusivity rights, (2) Building insurance carrier relationships to complement referral network, (3) Adding higher-margin specialty services (biohazard, trauma cleanup), (4) Implementing technician training/apprenticeship program to address labor shortage, (5) Leveraging franchise brand marketing to capture market share from independents. National consolidation trend creates future exit opportunity to PE-backed platform at 4-5x EBITDA. SBA financing with $657K cash-after-debt supports growth investment while owner takes $200K+ salary. Strong NYC property values and climate-driven water damage events (aging infrastructure, extreme weather) drive consistent project pipeline.
Bear Case
Thin reported SDE of $639K (20.2%) proves accurate as reconstruction overestimates owner add-backs or misses hidden costs. Customer concentration analysis reveals top 5 property managers drive 40%+ of revenue; loss of 1-2 key relationships causes 20%+ revenue decline. Skilled technician shortage intensifies — average age 50+, pending retirements, wage pressure squeezes margins further. Franchise transfer gets delayed 4-6 months during license/insurance transitions, causing project pipeline disruption and relationship attrition. NYC regulatory burden escalates: mold certification renewals, workers comp audits, prevailing wage requirements on commercial projects. PE-backed competitors (BluSky, Signal) aggressively recruit technicians and undercut pricing. Owner holds critical relationships personally; property managers don't transfer loyalty to new owner. Economic slowdown reduces commercial construction activity and property management budgets. Working capital needs spike during summer peak season (revenue index 1.15) straining cash flow. Equipment/vehicle fleet requires $150K+ in deferred replacement within 12 months.
Who You're Up Against
| Company | Type | Est. Revenue | Threat Level |
|---|---|---|---|
| SERVPRO | Franchise | $3B+ system-wide | Largest restoration franchise network with extensive brand recognition, 24/7 response capability, and insurance carrier partnerships. Competes on scale, national accounts, and marketing budget. |
| ServiceMaster Restore | Franchise | $2B+ system-wide | 70+ year national franchise focused exclusively on restoration (water, fire, mold). Strong insurance relationships and corporate account penetration. Competes on specialization and established processes. |
| Water Damages Restoration NY | Independent | $5-10M estimated | 25+ years NYC experience with deep local relationships. Competes on personalized service, flexible pricing, and property manager trust. No franchise royalty burden allows price competition. |
| Exit Mold NY | Independent | $3-7M estimated | Specialized in mold remediation with integrated post-verification testing. Competes on technical expertise, NYC regulatory compliance knowledge, and niche focus. Captures higher-margin mold work. |
| BluSky Restoration Contractors | PE-Backed | $500M+ (multi-location platform) | Kohlberg & Company-backed consolidator actively acquiring regional operators. Competes on scale, insurance carrier volume agreements, and aggressive technician recruitment. Represents exit opportunity but also pricing pressure risk. |
Competitive Advantages
Moat Assessment
Narrow moat based primarily on established referral relationships and franchise brand recognition, but vulnerable to owner transition execution risk and technician retention challenges. Referral network durability is Moderate — property managers value reliability and responsiveness, but relationships may be personally tied to current owner rather than institutionalized. Franchise brand is Strong and transferable, providing continuity and trust. Geographic coverage across four boroughs is Moderate — provides convenience but not exclusivity (many competitors serve same area). Technician team is Weak moat — skilled labor shortage and aging workforce create turnover risk; competitors can recruit away certified technicians with wage increases. Service diversification is Moderate — reduces customer concentration risk but doesn't create pricing power. Overall, business lacks deep structural moat; competitive advantage depends on execution quality, customer service, and relationship management rather than proprietary technology, scale economies, or regulatory barriers. PE consolidation trend (BluSky, Signal) suggests larger platforms may eventually out-compete on technician recruiting, insurance partnerships, and marketing investment unless this business can differentiate on service quality and local market knowledge.
Risk Scores & Due Diligence
Due Diligence Priorities
- 1. Customer Concentration & Relationship Mapping: Obtain 3-year customer revenue breakdown, top 20 customers with contact details, relationship ownership (owner vs. company), contract terms, and referral source categories (property managers, contractors, insurance). Interview top 5 customers to assess transfer willingness.
- 2. License & Regulatory Compliance Audit: Verify all current licenses (NYC DCA contractor, NYS mold assessor/remediator, HIC license), insurance policies (GL $2M+, WC, auto fleet), and compliance history. Map transfer process with franchise, city/state agencies, and insurance carriers. Estimate time/cost for new owner licensing.
- 3. Technician Workforce Analysis: Document all employees: names, ages, tenure, wage rates, certifications, specializations. Assess retention risk (pending retirements, competitive offers). Review workers comp claims history, safety record, training programs. Evaluate franchise training/apprenticeship support.
- 4. Franchise Agreement Deep Dive: Review franchise disclosure document, territory exclusivity map, royalty/marketing fund structure, transfer approval process (timeline, fees, training requirements), support services provided, and termination clauses. Assess franchisor financial health and litigation history.
- 5. Financial Reconciliation & Margin Validation: Obtain 3-year tax returns, P&Ls, bank statements, and A/R aging. Reconcile reported $639K SDE vs. Est. $876K — validate owner salary, perks, one-time expenses. Analyze margin trends by service line, project profitability, and seasonal cash flow patterns.
- 6. Equipment & Vehicle Fleet Inspection: Inventory all trucks, trailers, water extraction equipment, dehumidifiers, air movers, mold remediation gear, and tools. Assess age, condition, maintenance records, replacement schedule. Verify liens, insurance coverage, and estimated replacement capital needs.
- 7. Insurance & Claims Relationship Assessment: Identify all insurance carrier relationships (TPA partnerships, preferred vendor programs, Xactimate certifications). Analyze insurance-funded vs. direct-pay project mix, average claim size, payment terms. Assess owner's personal relationships vs. transferable programs.
What Needs to Transfer
Potential Deal Breakers
- Franchisor refuses transfer approval or requires >$50K transfer fee — eliminates brand value and operational systems justifying asking price
- Buyer cannot obtain NYC DCA contractor license within 60 days — all project work halts, revenue stops, technicians leave
- NYS mold licenses cannot be obtained before closing or within 90 days post-close — 25% of revenue (mold remediation) becomes non-biddable
- Workers compensation insurance quote exceeds $80K/year (2x estimate) due to claims history or classification — destroys margin assumptions
- Key property manager relationships are owner-personal and refuse to continue with new owner — 30%+ revenue at immediate risk
100-Day Integration Playbook
- Complete all license transfers (NYC DCA, NYS mold, HIC) and insurance policy assignments with franchise coordination
- Owner introduces new buyer to top 20 customers, property managers, and referral partners via joint meetings
- Meet all technicians individually — assess retention risk, address concerns, establish new compensation/benefits structure
- Implement daily project tracking dashboard to monitor pipeline, cash collection, and service quality metrics
- Join franchise training program and connect with other franchisees for best practice sharing
- Launch technician retention program: wage benchmarking, skills-based pay tiers, apprenticeship/training path, safety bonuses
- Analyze project profitability by service line — identify high-margin services to prioritize, low-margin work to re-price or exit
- Negotiate supplier contracts (materials, equipment rental) leveraging franchise buying power for 5-10% cost reduction
- Implement digital marketing (Google Local Services Ads, property manager LinkedIn outreach) to diversify beyond referrals
- Establish monthly financial review cadence: cash flow forecast, A/R aging management, margin tracking by service category
- Develop 2-3 insurance carrier relationships (TPA partnerships, preferred vendor programs) to complement referral network
- Add 1-2 complementary service lines (biohazard cleanup, trauma/crime scene, hoarding remediation) with higher margins
- Expand territory into adjacent boroughs (Staten Island, Long Island) leveraging franchise exclusivity and existing relationships
- Hire 2-3 additional certified technicians to eliminate project backlog and capture peak season demand
- Implement CRM system (Salesforce, HubSpot) to track referral sources, project pipeline, and customer retention metrics
Value Creation Waterfall (3-Year Outlook)
Our Verdict
Verdict: Conditional — Proceed to LOI
CONDITIONAL PASS with significant price reduction required. Business shows solid fundamentals — $3.2M revenue, strong referral network, recession-resistant services, and healthy Est. SDE margin of 27.8% after reconstruction. However, asking price of $1.5M (2.3x revenue, 1.7x Est. SDE) sits 15-20% above fair value given: (1) Thin reported SDE of 20.2% requiring validation, (2) Unknown customer concentration creating revenue risk, (3) Complex NYC license transfers adding 3-6 month execution timeline, (4) Skilled labor shortage with aging workforce, (5) Lack of financial transparency (no EBITDA, limited service line breakout). Recommended approach: Negotiate to $1.25M-$1.3M range (1.9-2.0x revenue, 1.4-1.5x Est. SDE) with 60-day due diligence period focused on customer concentration, technician retention, and license transfer feasibility. Ideal buyer: Experienced restoration operator who can validate margins, execute license transfers efficiently, and solve labor challenges through franchise training programs. Pass if seller won't reduce price 15%+ or provide detailed financials showing service line profitability and customer concentration.
Recommended Next Steps
- Request detailed financials: 3-year tax returns, monthly P&Ls by service line, customer revenue breakdown (top 20), A/R aging, and project-level profitability data
- Submit initial offer at $1,250,000 (1.9x revenue) with 60-day due diligence period, contingent on franchise transfer approval and license verification
- Engage restoration industry M&A advisor (Restoration Brokers of America already involved) to benchmark margins and validate asking price vs. comps
- Conduct preliminary franchise discovery: Interview franchisor, review FDD, speak with 3-5 other franchisees about support quality and transfer process
- Schedule on-site visit: Shadow operations for 2-3 days, meet technicians, inspect equipment/vehicles, observe project execution and customer interactions
- Retain NYC business attorney to review license transfer requirements (DCA contractor, NYS mold, HIC) and estimate timeline/costs for new owner
- Engage insurance broker to confirm policy transferability (GL, WC, auto fleet) and obtain preliminary quotes for new owner coverage
Suggested Offer Structure
$1,250,000 (1.9x revenue, 1.4x Est. SDE) with 60-day due diligence, 10% SBA down payment, seller note of $100K over 3 years at 6% subordinated to SBA loan, contingent on franchise approval and license transfers
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Related Resources
Sources
BizBuySell listing #2433900 · Ozone Park economic data (household income, employment, housing) · US restoration industry market size and structure · NYC contractor licensing requirements (DCA, HIC) · NYS mold remediation licensing and regulations · Construction labor shortage reports and wage trends · Comparable restoration M&A transactions (American Restoration, Signal, ATI) · SERVPRO and ServiceMaster Restore competitive analysis · Industry benchmark cost percentages for restoration services