Determining the value of a restaurant is always tricky because you need to separate the real assets and liabilities of the company from the value of the brand. For example, a pizza shop in a Seattle outlet mall has valuable assets like equipment, a favorable location, and a good lease that could interest a buyer. However, customers may not care that they are buying a slice of pizza from John’s Pizza or Joe’s Pizza if the quality is reasonable. In this example, the pizza restaurant’s brand adds limited value. On the other hand, a restaurant known for signature items, with a strong customer base and quality marketing tools will have value beyond the tangible assets.
Sale price of a restaurant includes:
Furniture, Fixtures and Equipment
Remaining lease terms Liquor license, if applicable Goodwill When the time comes to sell your restaurant there are many tangible and intangible factors to consider. Your restaurant is unique, and even if you’re prepared to sell, the emotional connection that you have with the business can make setting an accurate and feasible price extremely difficult. In the case of determining a competitive price for your restaurant, a professional business broker can be invaluable. Professional consultants help you to move past your emotional connection to the restaurant. Next an experienced broker works through the details to set the best price to attract buyers while still meeting your own financial goals.
If you are currently a restaurant owner, you will attract quality buyers by maintaining a detailed record of income, expenses and other financial statements. Make sure that you always have at least 12 months of profit and loss statements for your company available for potential buyers to evaluate. List your inventory and other assets, such as specialized equipment and furniture.
Calculating a competitive sale price is an area where a good broker with restaurant expertise is well worth the fee. The general formula to value a business is based on the sale price. The value can be calculated by taking net profit times a factor of 3% to 5%. For example, if a restaurant earns $100,000 net profit annually, then the restaurant’s market price is between $300,000 to $500,000.
If a restaurant is marketed to the right buyers at a competitive price and the restaurant shows an accurate and truthful net income, the right buyer is out there. There is a lot that goes into selling a restaurant, much more than many other types of businesses. Find a broker that has access to many local buyers in the company’s database. Also, locate a broker that offers great exposure to available restaurants and maintains confidentiality.