March 4, 2024
The restaurant sector is characterized by local enterprises offering food services to seated patrons. This sector is highly fragmented, with no dominant corporations, leading to intense competition from various sources. Industry reports from IBIS World indicate the presence of approximately 157,000 restaurants nationwide, collectively generating over $208 billion in sales revenue in recent years. The sector's revenue is on an upward trajectory, and with profit margins improving, engaging in restaurant transactions can be profitable. Whether you're looking to enter or exit the restaurant business, understanding the valuation multiples applicable to restaurants is crucial.
The process of buying or selling a restaurant necessitates a clear grasp of valuation principles. Obtaining a business valuation can enlighten you on how to appraise a restaurant properly. For buyers, it aids in mastering negotiation tactics and determining a just purchase price. Sellers benefit from valuations by finding an equitable listing price and learning strategies to enhance their restaurant's value.
Our team, specializing in business appraisals, collaborates with numerous restaurants across the country, offering insights and valuation services to help restaurants thrive. We welcome any queries regarding restaurant valuation and encourage starting with a no-cost consultation.
Experts utilize various valuation techniques for restaurants, with the market approach being a prevalent one. This approach employs valuation multiples, which serve as a benchmark but may vary depending on each restaurant's specifics. It's advisable to seek a personalized business valuation to ascertain the appropriate multiples for your restaurant.
Disclaimer: The presented multiples are for educational purposes and should not be considered as valuation advice. For precise valuation inquiries, consult a qualified business valuation professional.
Valuation multiples are widely used in appraising restaurants, acting as ratios that compare a restaurant's financial metrics to its market value. Appraisers benchmark your restaurant against similar entities recently sold, establishing a value range for your establishment.
For instance, if a restaurant posts $280,000 in discretionary earnings and receives a 2.21x multiple, its estimated value stands at $618,800. Alternatively, a 2.83x multiple would indicate a value of $792,400.
Our expertise in applying valuation multiples aids in accurately determining a restaurant's market value, taking into account each establishment's unique attributes.SDE Multiples for RestaurantsAverage SDE Multiple range: 2.14x – 2.96x
Restaurants typically trade within this SDE multiple range. The multiple applied to the seller's discretionary earnings gives an estimated business value.
For example, a restaurant with $376,000 in discretionary earnings and a 2.58x multiple would be valued at approximately $970,080.SDE multiples are vital for assessing a restaurant's market value, with valuation experts adjusting for expenses not expected to recur under new ownership.
Average EBITDA Multiple range: 2.80x – 3.65xThis range represents the average EBITDA multiples at which restaurants transact. Applying these multiples to a restaurant's EBITDA yields its implied business value.
For example, a restaurant with $301,000 EBITDA and a 3.21x multiple would be valued around $966,210.EBITDA multiples offer insights into a restaurant's investment return, facilitating comparisons with similar businesses.
Average REV Multiple range: 0.32x – 0.48xRestaurants trade at these revenue multiples, allowing appraisers to calculate a restaurant's value by applying the multiple to its revenue.
For instance, a restaurant earning $2,200,000 in revenue and trading at a 0.41x multiple would have an approximate value of $902,000.While REV multiples are less commonly used, they still provide a perspective on a restaurant's total revenue generation capabilities.
Utilizing market multiples for restaurants is a common practice to gauge a restaurant's fair market value. Various methods and multiples may be relevant, and a personalized business valuation can clarify the most suitable approaches for your restaurant. Our aim is to identify your restaurant's strengths and areas for improvement, offering guidance on value maximization whether you're buying, expanding, or selling. We're here to assist with your valuation needs and encourage scheduling a complimentary consultation to explore valuation multiples for restaurants.
Subscribe for free to receive new posts and support our work and our founders.
PSG and David helped us strategically re-think our 10+ vear-old business to future proof it. He added a business intelligence platform that allowed us to manage the company from an integrated modeling perspective. While here, he also helped motivate and re-engergize our teams with his positive and inspiring management style and exceptional communication and interpersonal skills. Would highly recommend him.
PSG, John and Ethan were absolutely crucial in helping me and team, and empower us to build a great strategy.I am grateful for all of the work you guys continue to do for our companies.
David/PSG helped us get ready for our institutional founding round and played a pivotal role in getting NuLife our first $3M Term Sheet offer from a VC firm. David’s majestic good looks made it a pleasure to get out of bed each day in hopes of another zoom call together. Without his rugged handsomeness and nurturing way not sure we would have made it.
Our solutions leverage advanced technology, proprietary data, and deep expertise to help companies in new and exciting ways
Need help or assistance? Our team is standing by to make sure you get the help you need. Whether you need to grow or exit your business, we're ready to help!
