Due diligence: What restaurants are selling for now

Restaurants ultimately sell for what the market will bear, and new sales data released by Internet marketplace site BizBuySell provides a clear picture of the valuations buyers are placing on foodservice businesses today. The most recent numbers, covering sales that occurred during the second quarter of 2013, can give you an indication of how you might price your restaurant for sale, how much you can expect to get for it or, if you’re in buying mode, how much to offer on your next one.

Some disclaimers first. BizBuySell data doesn’t include every U. S. restaurant that sold in April, May and June of this year. The company points out that closed transactions are self-reported by the representing business broker, that not all closed transactions are reported and that figures from for-sale-by-owner deals aren’t included.

However, BizBuySell’s aggregated data covers 398 restaurant transactions that closed in the second quarter of this year, so its numbers are likely representative.

Here are the BizBuySell restaurant transaction results for Q2 2013:

• Median sales price: $127,000
• Median asking price: $141,500
• Average sale to asking price ratio: 0.895248
• Median revenue: $360,000
• Average multiple of revenue: 0.393546
• Median cash flow: $80,246
• Average multiple of cash flow: 2.0083897

These are median numbers, so your restaurant may command higher or lower figures than what is reported here. But if you’re planning on selling your restaurant anytime soon, the lesson is clear: Do what you can to boost your restaurant’s revenue and cash flow before you put it on the market. Be aware that interested parties don’t really need a calculator or a spreadsheet to figure out how much to ask for, or bid on, a restaurant business. In the end, revenue and cash flow drive the decision.

Of note: a food truck business in Hennepin County (Minneapolis) changed hands at the full asking price of $68,000 during this period. The revenue multiple on this sale was .40 and the cash flow multiple was 2.00. Some may find it interesting that at least one buyer felt a mobile restaurant business should be valued the same as the brick-and-mortar equivalent.