When the time comes to sell a restaurant business, most restaurant owners are often unsure about how to value their Establishment or the factors that make a difference. This uncertainty can make the selling process seem daunting. However, understanding the restaurant valuation process can provide a sense of relief, serving as the starting point for your restaurant sale.
Restaurant owners may have various reasons for selling their business, from retirement to a new venture. However, when the time comes to sell, many owners find themselves unprepared. By educating yourself on the valuation process, you can take control of the situation and be ready when the time comes to sell.
Dominique Maddox, a Dallas, Texas Restaurant Broker ” emphasizes the crucial role of a restaurant broker in educating restaurant owners on the valuation process. A broker’s guidance can provide owners with a sense of support and direction, making the selling process less daunting.
The Restaurant Business Broker provides the four factors that matter when determining a restaurant’s value.
1. Revenue and Profitability: Buyers will want to know if the business is profitable. If the restaurant shows a profit, then buyers will try to calculate the following numbers:
EBITDA- Earnings before Interest, Taxes, Depreciation, and Amortization
SDE-SDE-Seller’s Discretionary Earnings
Multiple: How many times the earnings is the restaurant listed for? Example 2.5 Multiple
$100,000 x 2.5 = $250,000
2. Assets: Include furniture, fixtures, restaurant equipment, and goodwill. When a restaurant is unprofitable or shows little profit, it will be valued as an Asset Sale. Goodwill includes names, websites, systems, employees, recipes, trademarks, and others. Goodwill for restaurant franchises can differ depending on the strength of the Franchise Brand
3. Lease- The lease terms can be a considerable factor when selling a restaurant. Deals that don’t include real estate are at the mercy of the landlord approving the lease assignment or new lease. The lease terms can dictate if the seller is in a position of strength or weakness.
4. Location, Location, Location: Everyone should know that location can help a restaurant sell or be a deciding factor why it doesn’t sell. Restaurant buyers are constantly looking for great locations to buy a restaurant to keep or convert to a new concept. Less desirable locations usually have a smaller buyer pool and sell for less.
To get an accurate restaurant valuation, you may hire a restaurant broker specializing in restaurant sales. A restaurant Resale Specialist will consider all factors and provide a valuation that will help guide your sale.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at [email protected]. Visit our website at www.EATSbroker.com
