Phone: 925-736-8200
Fax: 925-736-8200
jeffback@pacbell.net
348 Red Maple Drive
Danville, CA 94506
CA License # 00463307

What is Your Restaurant Worth?

Over the past 14 years, I have had a chance to evaluate hundreds of restaurants for clients. Many of these restaurants were eventually listed and sold, and I have been able to measure my evaluation against the actual selling price. By doing this I have formulated an opinion as to how to evaluate a restaurant so that the result is as accurate as possible when viewed against actual market results. I hope it does not surprise you, but nobody can tell you exactly what your restaurant is worth. There are simply too many factors that effect value, and at best you can only be given a range of value.

When I started selling restaurants for others, and this was after spending 5 years as President of Charlie Brown's Restaurants where we purchased 18 restaurants, I was told that there were formulas that could be applied to determine the value. I was told for example that restaurants sold for certain time's cash flow or a certain times the gross sales. I was told that restaurants sold for 3 times cash flow or 2 times cash flow, sales times a number (say 30% of gross) to arrive at a valuation. Others suggested a method of taking the income stream over a period of years and calculating the present value of the discounted cash flow over a specific period of time. This method calculates the present value (the value today) of the discounted cash flow. None of these methods by themselves took into account the market factors that effect market value. These important factors are as follows:
Why does a restaurant that cost $300,000 to build sell for the same price as a restaurant that cost $75,000 to build? And why do two restaurants that have a net profit of $100,000 sell for very different prices?

I have found that the above factors have more to do with affecting and establishing the value of a restaurant than any simple formula could possible hope to suggest. The method that I use to establish value is a MARKET APPROACH that utilizes the factors and compares the results to the vast database of actual sales information that I have accumulated over the years.

If you are interested in having a comprehensive free evaluation of your business call Jeff Back at 925-736-8200.


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J. Back & Associates   ·   Restaurant Real Estate
Phone: 925-736-8200   ·   Fax: 925-736-8200   ·   jeffback@pacbell.net
348 Red Maple Drive   ·   Danville, CA 94506
CA License # 00463307

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