How to Value Your Quick Service Restaurant Before Selling
If you're preparing to sell your quick service restaurant (QSR), it's essential to know how much your business is worth. A professional valuation can give you a fair estimate of what your business might sell for, and it’s an important step to attract serious buyers.
Key Documents You'll Need
Before starting the valuation process, you'll need to gather several important documents:
Tax Returns: Buyers will want to see your restaurant's tax returns from the last 3-5 years to understand its financial health.
Profit and Loss Statements (P&L): These show how much money your business has made and lost over a specific period, typically covering a year.
Balance Sheet: This document outlines your assets (like equipment and inventory) and liabilities (debts or loans), giving a clear picture of your business’s financial standing.
Sales Records: Detailed sales reports help potential buyers understand customer trends and growth potential.
How the Valuation is Done
The most common method for valuing a QSR is through discounted cash flows (DCF). This looks at how much cash your business is expected to generate in the future and calculates its current value based on that. Buyers also commonly base their offers on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). For example, if your EBITDA is $100,000 and the industry multiple is 4, the potential sale price could be around $400,000.
What Else Affects Valuation?
Aside from the numbers, several other factors will influence the final valuation:
Location: Is your restaurant in a high-traffic area? Being in a prime location can raise your business’s value.
Financial History: Consistent revenue and profitability over several years make your business more attractive to buyers.
Market Trends: The overall demand for quick service restaurants in your area can also impact the sale price.
Having these documents ready and understanding how the valuation process works will help you be better prepared when it’s time to sell. Whether you're thinking of retiring or simply moving on to a new opportunity, a well-prepared valuation will put you on the path to a successful sale.