How to determinate economies of scale can be reached with the added locations?

What is a reasonable price you are willing to pay for the acquisition, assuming you want to earn a 20% return?

SCENARIO You own a small H&R Block franchise office and has received an offer to purchase four more locations. Each location is similar in size and expenses. First review the expenses to determine what are the fixed and variable costs. Second determine if any economies of scale can be reached with the added locations. Third determine the profitability of the added locations. Finally, assuming you want to earn a 20% return, what is a reasonable price you are willing to pay for the acquisition. CASE STUDY FRANCHISE BUSINESS H&R BLOCK FRANCHISE OFFICE Gross Revenue 400000 Expenses Employee Admin 25000 Producers 132000 0 12560 o Office Manager Payroll Tax Health Insurance Work Comp Total Employee Burden Rent 1485 171045 36000 Franchise fee 120000 4500 1500 0 3000 300 3055 Automobile expense Business License and Permits Client Developemnet Computer and Technology Insurance Office Expense Postage Professional Fees Telephone and Internet Travel Retirement Plan Executive 3439 1500 4731 1025 0 Rent 36000 Franchise fee 120000 Automobile expense 4500 Business License and Permits 1500 O 3000 300 3055 Client Developemnet Computer and Technology Insurance Office Expense Postage Professional Fees Telephone and Internet Travel 3439 1500 4731 1025 Retirement Plan Executive Total Expense 350095 Net Income 49905