Estimating a Cost for a Local Restaurant

For many people looking to buy an existing restaurant, price is a big concern. Trying to determine whether or not you are getting a reasonable figure for the restaurant can be a daunting prospect. There are numerous variables to consider, including local real estate trends, the clientele, the franchise particulars, and more. Fortunately, Fit Small Business provides us with ways to get a decent ballpark idea of what you should be spending for any given restaurant:

Method 1: Median Industry Sales Prices
This is the best method to use if all you know is that you want to buy a local restaurant, and you haven’t yet settled on which one you want to buy. This is where you take sales data from the restaurant industry, which shows us that a restaurant generally sells for a median price of $150,000. You may be able to find a restaurant for less than this, but remember that roughly half of all restaurants are going to go for more than this median, so plan to spend at least this much.

Method 2: Industry Multiples
This is a good method to use if you know the SDE of the restaurant you wish to purchase. The SDE equals the business’s pre-tax income, after costs, but including the salary of the owner and certain other expenses. Once you know this figure, you can multiply it by the restaurant industry multiplier to calculate a cost. SDE multiples are usually somewhere between one and three, with restaurants generally falling on the lower end. So, based on a multiplier of 1.96, a restaurant with an SDE of $100,000 can be expected to sell for roughly $196,000.

Keep in mind, of course, that these figures will only get you a rough estimate. Consult our Bellevue restaurant real estate company for more information.