A restaurant is usually worth the profit it can keep making for a new owner, adjusted for risk. For restaurants, the lease and rent, whether the head chef and the menu stay, the liquor licence, wage costs and reliance on delivery apps often move the value most. High sales alone do not make a restaurant valuable: kept profit does.
What is the short answer?
Your restaurant is worth the profit it can keep making for a new owner, adjusted for the risk that the profit will not last. That rule applies to every business. What is special about restaurants is how fragile that profit can be.
Restaurants carry high rent, high wages and food costs that move. Profit often depends on one site, one chef and one menu.
What pushes the value of a restaurant up or down?
Anything that makes the profit more reliable for a new owner tends to lift value. Anything that makes it less certain tends to lower it.
| Factor | Tends to support value | Tends to reduce value |
|---|---|---|
| Lease | Several years left, with options to renew | Lease ending soon, or no options |
| Rent | Rent the trade can comfortably carry | Rent that takes much of the gross profit |
| Chef and menu | Recipes written down, and a team that can run the kitchen | Everything rests on one chef who may leave |
| Owner's role | Managers run service day to day | The owner works most services unpaid |
| Liquor licence | Current and able to transfer | Missing, limited or hard to transfer |
| Sales mix | Steady dine-in trade plus takeaway | Heavy reliance on one delivery app |
| Equipment | Kitchen and cool rooms in good order | Old gear that needs replacing soon |
The chef and the menu. If diners come for one person's cooking, a buyer is paying for something that may walk out the door. Written recipes, a capable second chef and a menu others can cook all reduce that risk.
Wage costs. Restaurants employ many staff, often on penalty rates at nights and weekends. A valuer checks that wages are paid at award rates. Underpaid wages make profit look higher than it really is, and a buyer may inherit the problem. If you are unsure, ask your accountant or the Fair Work Ombudsman.
Delivery apps. Recorded delivery sales count. But app fees and packaging leave less profit per order, and one app's rules can change.
What are the add-backs and traps in a restaurant?
Add-backs are costs added back to profit because a new owner will not have them. Traps are adjustments that look good but do not hold up. Restaurants have several of each.
- Owner wages. If you work as chef, manager or front of house, a fair wage for that role is deducted from profit.
- Family and unpaid help. Relatives on little or no pay need the same treatment.
- Cash. Only takings recorded in the accounts and tax returns can be relied on.
- Stock. Food and drink stock, especially wine, is usually counted and settled separately.
- Equipment. Check what is owned and what is leased or financed. A buyer takes on, or replaces, those payments.
- Lease transfer. The landlord usually needs to agree. The Australian Government's guide to buying an existing business lists landlord agreement to the transfer as a question a buyer should ask.
- Licences. The liquor licence, food business registration and any outdoor dining permit need to be current. The same government guide tells buyers to check that licences and permits are in place and up to date.
- Franchise approval. A franchised restaurant usually needs the franchisor to approve the buyer.
What documents matter for a restaurant valuation?
Start with two or three years of profit and loss statements, balance sheets and tax returns. For a restaurant, these often matter just as much:
- The lease, renewal options and the latest rent review.
- Point of sale reports by day and session, plus delivery app statements.
- Rosters, wage records and the award or agreement you pay under.
- The liquor licence, food business registration and other permits.
- An equipment list with ages, plus any finance or lease agreements.
- Recent stocktakes, including the wine list.
- The franchise agreement, if there is one.
See the full list of documents needed.
How can two similar restaurants be worth different amounts?
This example is made up to show the idea only. It gives no values or multiples.
Imagine two restaurants in the same suburb with similar sales. Restaurant A has a long lease with options. A head chef and sous chef share the kitchen, and the recipes are written down. Its liquor licence is current and can transfer.
Restaurant B has two years left on its lease. The owner is the only chef and works every service without a wage. Much of its trade comes through one delivery app.
Once Restaurant B's profit allows for a chef's wage and app fees, it keeps less, with more risk. A valuer would likely find Restaurant A worth more.
Which Valuo report fits my restaurant?
Choose by who will rely on the report. If it is for your own planning, the Business Value Report fits. If a buyer, lender, investor or partner will rely on it, choose the Professional Valuation Report.
| Business Value Report | Professional Valuation Report | |
|---|---|---|
| Suits | Your own planning, or deciding whether to sell | A buyer, lender, investor or partner will rely on it |
| Signed | No, but reviewed by a valuer before it is issued | Yes, by the valuer responsible |
| Fee, revenue under $1 million | $995 + GST | $1,495 + GST |
| Fee, revenue $1 million to under $2 million | $1,495 + GST | $1,995 + GST |
| Fee, revenue $2 million to under $5 million | $2,495 + GST | $2,995 + GST |
Fees are fixed by annual revenue and never depend on the value concluded. For a restaurant group with revenue of $10 million or more, you receive a fixed fee quoted before any work starts. If partners are buying each other out, Oliver Group handles shareholder buyouts. For tax on a sale, speak with your accountant.
What should I do next?
- See your fee in two taps: Get your fixed fee.
- Compare both reports and every revenue band: pricing.
- Read the general guide: how much is my business worth.
- Need finance? Read business valuation for a bank loan.
Questions
Is my restaurant worth what I spent on the fit-out and kitchen?
Not necessarily. A buyer pays for the profit the restaurant can keep making, not for what was spent. Equipment and fit-out support value when they help produce that profit and will not need replacing soon.
Does my liquor licence add to the value of my restaurant?
It can. A licence that is current and can move to a new owner lets the restaurant keep its drinks trade, which often adds to profit. If the licence cannot transfer easily, a buyer will see risk.
What if I am the head chef?
Then a new owner would need to pay a chef, or cook themselves. A valuer deducts a fair wage for that role. If diners come for your cooking in particular, a buyer may also see a risk that trade drops when you leave.
Do takeaway and delivery app sales count?
Yes, if they are recorded and likely to continue. A valuer looks at the profit left after app commissions and packaging, which is often lower than on dine-in sales. Heavy reliance on one app is also a risk.
Which Valuo report should I get for my restaurant?
The Business Value Report suits your own planning, such as deciding whether to sell. If a buyer, lender, investor or partner will rely on the figure, choose the Professional Valuation Report, which is signed by the valuer responsible.
General educational information, not advice. Examples are hypothetical and do not value a real business. The right treatment depends on the purpose, the evidence and the agreed scope.