Basic formulas for restaurants:
1.Full-Service Restaurant- about 1/3 of Annual Gross, 2 to 3 x EBITDA (Earnings Before Interest Tax Depreciation and Amortization)
2. Limited Service- 4/10 of Annual Gross, 2-3x EBITDA.
These factors will indicate a value of tangible/operating assets and goodwill. It does not include cash, receivables, inventory and it assumes the business is free of long term debt and short term payables.
The factors will be lower with restaurants showing EBITDA and/or Seller's Discretionary Earnings in the $100,000 or lower range. Important factors to consider are whether there is a liquor license, and whether there is a lease. No business is average and every case should be evaluated by its own merits.
Anthony S. Cangelosi
TEDESCO Appraisal & Valuation
Aug 29, 2013