Key Person Risk in Multi-Unit Businesses Isn't Who You Think It Is

In a single-location acquisition, key-person risk is straightforward. It's the owner. Everyone knows to plan for it. In a multi-unit business, it's harder to see and it's usually not the owner. It's a location manager, a department lead, or a regional supervisor whose impact is buried in the consolidated P&L. The business looks like it performs consistently across locations. It doesn't. One person is masking the variance. Here's how I look for it: 1. Disaggregate performance by location and normalize for variables that should explain differences. Same market, same brand, same product mix. If two locations have a 30%+ spread on the same margin metric, something operational is driving the gap. The financials will show two locations performing differently. They won't tell you why. In most cases, the answer walks out the door at 5pm. 2. Look at performance trajectory when managers rotate. If a location's numbers improve when a specific person arrives and decline when they leave, you're not looking at a business. You're looking at an individual carrying the P&L. Most sellers don't track this because they've never had to. But if you can get two or three years of monthly data by location alongside a staffing timeline, the correlation is usually obvious. 3. Check whether the process exists independent of the person executing it. A high-performing location with documented SOPs, training systems, and consistent onboarding produces results that transfer. A high-performing location where the manager "just knows how to run it" produces results that leave with them. Ask the seller how they'd replicate their best location's performance at their worst location. If the answer is "hire someone like [name]" instead of "deploy this system," you've found the dependency. The reason this matters for deal structure: if 15-20% of EBITDA is functionally dependent on one or two people who aren't the owner, your retention strategy and holdback structure need to reflect that. A standard employment agreement isn't enough. You need to understand exactly which people drive which dollars and build incentive structures that survive the transition. QoE will confirm the EBITDA number is real. It won't tell you whether it's portable. That's a different question, and it lives in the operations. Happy to discuss methodology if anyone's evaluating a multi-unit deal and wants to think through this.