Business Topic — Quick Reference Cheat Sheet

Business Valuation Methods

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EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization

Bulk Sales (UCC Article 6)

• Sale of business inventory/assets outside ordinary course

• Buyer's duty: publish notice in newspaper + notify creditors 12 business days before transfer

• Escrow must withhold to satisfy known creditors

• Purpose: protect seller's creditors from assets disappearing

• California has repealed bulk sales requirements for most transactions — verify current applicability

Liquor Licenses (ABC)

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Method	Formula	Best For
EBITDA Multiple	EBITDA × Industry Multiple	Operating businesses
Seller's Discretionary Earnings (SDE)	Net profit + owner salary + add-backs	Small businesses (< $1M EBITDA)
DCF	PV of future cash flows at discount rate	Investment-focused buyers
Asset-Based	Net asset value ± adjustments	Asset-heavy or distressed
Rule of Thumb	Revenue × industry factor	Quick screening only
Type	Use	Notes
Type 47	On-sale general (restaurant)	Full bar at eating place
Type 48	On-sale general (bar)	Quota-restricted; most valuable
Type 21	Off-sale general	Full liquor store
Type 20	Off-sale beer & wine	Convenience stores

Transfer process: ABC Form 211 → 30-day public notice → ABC approval required → escrow contingent on ABC approval

Population quota: Type 47/48 limited; scarcity = six-figure license values in major CA markets

Franchise Law

• CFIL: California Franchise Investment Law (Corp. Code §31000+); requires registration + FDD delivery

• FDD: 23-item disclosure document; must be delivered 14 calendar days before signing or payment

• Transfer: Requires franchisor approval + transfer fee; purchase contingent on franchisor approval

• ROFR: Franchisor may exercise right of first refusal at offered price

• BPC §16600: California broadly voids non-compete agreements; post-term franchise restrictions are legally uncertain

Common Exam Traps

• ABC approval must happen BEFORE close of escrow — not after

• FDD = 14-day wait; not 10, not 30

• Net listings: legal in CA but BPC §10176(g) violation if broker takes advantage of seller

• Business sale = EBITDA multiple × multiplier; multipliers vary by industry (retail 1-2x, tech 5-10x+)

• Bulk sales protect creditors of the SELLER, not the buyer

• Franchise agreement governs renewal — no statutory right to identical renewal terms