How to Price a Restaurant for Sale

Selling a restaurant can be a tricky process because so many of the variables that give a restaurant value are intangible and difficult to quantify, such as reputation, customer satisfaction and ease of operation. Fortunately, there are some concrete benchmarks you can use to establish the price of a restaurant. Once you calculate a value based on these hard numbers, you can adjust the price higher — or potential buyers may try to adjust it lower — by referring to the intangibles that increase or lessen its value.

1. Calculate the net profit from the previous two years of operation by subtracting the total amount of your business expenses from your gross sales. Adjust this amount so it does not reflect expenses specific to yourself as the business owner, such as interest on loans or depreciation allowances on equipment that you purchased during previous years.
2. Calculate the value of equipment, decor, and restaurant fixtures. Base this figure on the amount you originally paid, adjusted by the amount that you have already claimed as depreciation on previous years’ tax forms. For example, if you paid $1,000 for your stove, and you elected to depreciate it on a five year basis, and three years have elapsed, you should value it at $400, or 40 percent of the purchase price because 40 percent of the depreciation period remains. If your equipment is fully depreciated, you should value it at 20 percent of the purchase price. Add the value of your equipment to your net profit from the two most recent years.
3. Adjust your purchase price higher according to any additional variables that affect its worth. Consider whether you hold a solid, long term lease on a restaurant space at below market value for its particular neighborhood, whether you have owned your restaurant for a considerable length of time, and whether you have a steady, satisfied clientele, a stable staff and clearly written recipes.

Article by: Maria

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