Restaurant valuations can vary significantly based on concept, location, and financial performance. Whether you own a fast-casual spot, fine dining establishment, or quick-service franchise, understanding how buyers value restaurants is crucial for making informed decisions.
How Restaurants Are Valued
Most restaurants are valued using a multiple of Seller's Discretionary Earnings (SDE), which represents the total financial benefit to an owner-operator including salary and profit.
Typical Restaurant Valuation Multiples
Restaurants typically sell for 1.5x to 2.5x SDE, depending on factors like:
- Concept type and brand strength
- Location quality and lease terms
- Revenue consistency and growth trends
- Condition of equipment and buildout
- Staff retention and management depth
What Drives Restaurant Value
Buyers pay higher multiples for restaurants with these characteristics:
- Favorable lease terms - Long-term lease with reasonable rent (ideally under 8% of revenue)
- Consistent sales - Steady revenue without major seasonal swings
- Strong management - Key staff who can run operations without owner presence
- Modern equipment - Well-maintained kitchen and front-of-house systems
- Solid reputation - Good reviews and established customer base
Common Value Detractors
These factors typically lower restaurant valuations:
- Short-term or month-to-month lease
- Heavy owner involvement in kitchen or front-of-house
- Declining sales or inconsistent performance
- Aging equipment requiring significant reinvestment
- High staff turnover or key employee dependency
What's your restaurant worth?
Get a free estimate using our valuation calculator. Takes about 60 seconds.
Calculate My ValuationPreparing Your Restaurant for Sale
If you're planning to sell, focus on these areas:
- Securing a favorable long-term lease
- Building a strong management team
- Documenting recipes, procedures, and vendor relationships
- Cleaning up financials and reducing owner add-backs
- Addressing any deferred maintenance
The restaurant industry sees steady buyer interest, particularly for well-established concepts with proven profitability. First-time buyers and experienced operators alike seek quality restaurants with transferable systems.