How much is the restaurant owner asking for his restaurant...?

Replies to This Discussion

Permalink Reply by Robert Sloop on February 6, 2011 at 8:13am

Utilize a standard valuation model to best determine the business worth.

Most restaurant owners are delusional about this and seldom use a formal valuation tool to back up their positions

Permalink Reply by Travis Martin on December 8, 2011 at 6:27am

There are a few generally accepted methods of evaluation that are pretty straightforward and should all come to the same approximate conclusion.  You can go to the following site to get more info on "the how-to" of doing an actual evaluation.

http://www.diomorestaurant.com/how-to-value-a-restaurant-business.html

I have done a few evaluations on restaurants in an attempt to determine whether the business is priced accurately or not. More often than not, you're right, they are way over priced. And from my experience, this stems from 3 factors.

1) Usually the seller has an unrealistic expectation of the value of their restaurant because they have a plan for themselves for after the sale and are expecting the proceed to fund their new plan.

2) There is a lot of value placed in their own passion for their business. They have worked hard to build the business and believe their efforts are more valuable than what the buying market believes.

3) Profitability (owners benefit/sellers cash flow) isn't always that easy to define. The perks and income the seller has been recognizing from the business aren't always able to be shown with definitive proof to a buyer, making it difficult to prove the business is worth what they are asking.