After almost 15 years in the restaurant business, Mr. Roberts is looking to open a conveniently located bistro and wine bar that will offer its lucky customers first-rate food and wines along with a comfortable yet elegant atmosphere in which to dine, meet friends, or have a drink after work. Roberts has found an excellent spot strategically located in downtown Springfield.
By William Bruce Updated May 19, Certain situations require a formal business appraisal including the larger merger-acquisition transactions, SBA loan applications, management performance tracking, estate planning, divorce — or the most dreaded of all — IRS issues.
After all, a professional, fully documented appraisal certainly takes the guesswork out of the situation. There are two methods of quickly approximating the value of a business: What is discretionary cash flow? Discretionary cash flow is the total cash that the business generates in a year that is available to the owner after deductions for only the necessary operating expenses.
Almost all restaurants and bars will appraise for somewhere between 1. Exactly where in this range that a specific operation will fall depends on what type of bar or restaurant, size of the operation, location, revenue trends and other factors.
The second method of estimating the value of a business is less accurate. This method of appraisal assumes the bar or restaurant is earning the average bottom line profit for its peer group.
But making that assumption, we know that a full service restaurant with liquor license will appraise for somewhere between 30 and 35 percent of gross annual revenue. Bars will average between 35 and 40 percent of annual revenue in appraised value. Coffee houses will appraise for about 40 percent of revenue.
A quick check of a few popular food franchises reveals the following average appraisal guidelines expressed as a percentage of gross annual revenue: And inventory, at cost food and liquor onlyshould also be added to obtain the total estimated value of the business.
However, you as the owner, seller or buyer of the business are the final arbiter of what the business is worth to you. Remember, these guidelines are only averages.
Here are additional related articles that might be of interest:Applebee's has given up on millennials. Earlier in August, executives announced that the chain plans to close between and locations this year.
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