© 2017 by Exit Value Advisers Pty Ltd. Proudly created with Wix.com

  • White LinkedIn Icon
  • Twitter
  • Exit Value Advisers
  • White YouTube Icon

Based in Melbourne (Victoria) we deliver business valuations all over Australia using expert business valuers and resources that allow us to work remotely.

We have completed:

Contact Us

L3/162 Collins St, Melbourne, 3000

0421 069 717

m.williams@exitvalue.com.au 

Cafe Restaurant or Bar Business Valuation

If there is ever a sector that appears so glamorous on the outside and yet involves the hardest work possible to make it a success it is the cafe, restaurant or bar sector.  Business owners jump into them thinking they can sip coffee or wine on the way to fame and riches and often it is the furthest from the truth.

 

Which is why business valuations for a cafe, restaurant or bar is so important, to highlight the areas that need to be performing right. 

There are low barriers to entry for a cafe, restaurant or bar - but they are typically limited to geographical areas.  High food and beverage costs, staff costs and rent often make the break even point high and therefore the importance of getting the right customer volume through the door is critical.

 

This then falls to marketing and in attempts to keep overheads low, owners often do the marketing and back office work themselves.  This often means the hours that a business owner must work per week is long.

In most cases the attraction is to pay cash to some staff as the business is typically a cash-based business.  Whilst this may seem lucrative at first, it only hurts the business valuation later as reported revenue is not as high as it should be.

We often get asked - how do I value a cafe business? The answer is no different to valuing any other business.  You determine the ongoing EBITDA (profits), make sure owners wages and market rent are taken into account, apply a EBITDA multiple for cafes and BOOM - there is the value of your cafe business.

The key in cafe, restaurant or bar business valuations is to make sure all revenue and costs are included and understand if the customer base is increasing, staying the same or decreasing.

A cafe or restaurant business valuation can highlight the business areas which are impacting the value of the business and help focus the owner of increasing the value of the business rather than solely focused on cash in their pockets.

Key Industry Statistics

According to IBISWorld, key statistics for the industries include:

  • Cafe and Coffee Shop Industry: Revenue growth 2.2% pa for 2014 - 2019, with total revenue of $10bn in 2018 and an average revenue per business of $490k.

  • Restaurant Industry: Revenue growth 1.8% pa for 2014 - 2019, with total revenue of $19bn in 2018 and an average revenue per business of $695k.  

  • Bar Industry: Revenue growth 1.3% pa for 2014 - 2019, with total revenue of $17bn in 2018 and an average revenue per business of $2.75m.  

We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?

SME Performance Whitepaper

Key Drivers of Cafe Restaurant or Bar Business Valuations

The valuation of a cafe, restaurant or bar business is typically driven by key factors below that influence profits and hence business valuations. 

These include:

  • Number of seats or serving capacity

  • Degree of opening hours.

  • Level of foot traffic and  

  • Market segments and market awareness

  • Gross profit margin

  • Proportion of staff costs per revenue

  • Rent 

  • Use of technology to streamline processes and automate reporting with key management functions.

  • Staff training and productivity
  • Certification to relevant quality, OH&S and local planning requirements.

Other key issues that impacts the valuation of these businesses are:

  • The length of the lease on premises

  • Whether market wages are paid to owners.

  • The uniqueness of each cafe, maklng comparison of business valautions between different businesses challenging.

EBITDA Margins range from a very low 5%- or less to as high as 25% (primarily for bars or high end restaurants), depending on the level of local competition, systems, technology and staff productivity.

EBITDA Multiples for most cafe, restaurant or bar businesses will vary considerably across sub-sectors, and will be heavily influenced by size and profitability.  Typical EBITDA Multiple ranges we have observed are:

  • Cafe business valuations: 1.0x - 2.5x

  • Restaurant business valuations: 1.0x - 3.0x

  • Bar business valuations: 1.0x - 3.0x

Our Business Valuation Experience

Our cafe, restaurant or bar business valuations Melbourne, Sydney and Brisbane experience has included including valuations for:

  • Local area cafe's with limited sit down capacity (often less than 15 people).

  • Restaurants with seating capacity of 15 - 45 people

  • Bakery cafe in regional areas

  • Bakery cafe in metropolitan Melbourne

  • Pizza restaurants in Melbourne suburbs (all part of different franchise chains)

  • Pizza restaurant in Sydney

  • Multiple site bakery cafe in Brisbane

  • Subway franchises in Melbourne

  • Multi-site Melbourne bar/restaurant (single owner)