Catering Business Valuation Benchmarks

Business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating catering companies relative to industry standards.

See also: Restaurants and Bars & Pubs

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Highlights of Catering Businesses Sold on BizBuySell

Catering companies listed and sold on BizBuySell are individually owned and operated businesses that provide mobile meal services for parties, weddings, corporate events, fundraisers, and similar special events. Just like restaurants, they generally focus on a select category of food and concept. Models vary, but generally these businesses operate out of a fixed location with a kitchen and food delivery, or have a mobile kitchen and staff sent out to events.

Catering Business Transaction Trends

Median sale prices of catering companies sold on BizBuySell has generally been consistent, with slow steady growth. A surge in larger catering businesses selling in 2022 was likely driven by owners taking advantage of record revenues and increased demand from pandemic-related effects to sell for higher prices.

Catering Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue and earnings. They represent the sales price of a business relative to its size and financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business, given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors, such as interest rates, inflation, consumer spending, and overall economic growth. Catering business valuation multiples rose slightly during and immediately following the Covid-19 pandemic. Increased interest rates in 2022 began to put pressure on values into 2023 and 2024.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow".  Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on a reasonable earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its sales volume.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of catering businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are always higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high revenue, high-value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, lower owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Lower revenue businesses with thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of catering businesses are valued and sold between 1.37 and 2.28 times their annual seller discretionary earnings, with 25% of exceptional, higher volume businesses trading above this range, and 25% of smaller, less desirable businesses selling below.

Financial Benchmarks

To determine how a business compares in terms of sales volume and financial performance relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated catering business financial ranges useful for comparing a given business to the broader market.

Catering Business Revenue and Earnings Trends

Demand for catering services fluctuated wildly during and after the Covid-19 pandemic. While many businesses had to close up, those that survived, thrived. In 2022, median revenue of catering businesses sold more than tripled, indicative of exits by business owners looking to capitalize on record valuations. Since then, median revenue and earnings have returned to typical levels, with annual growth around 15%.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to other catering businesses traded on the business for sale market. Below you will find discretionary earnings ranges for catering businesses sold over the past five years, as well as recent business for sale listings.

Revenue Ranges

Revenue volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue volume. The table below includes revenue ranges of businesses sold over the past five years and recent catering businesses listed for sale.

How Revenue and Earnings Level Affects Business Values

Obviously, higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Businesses that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a wedding caterer generating $1.5MM in revenue will likely command an earnings multiple over 2.3, while a smaller catering business with sales below $500k may trade below 1.4 times its discretionary earnings.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Higher volume businesses give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Food Service Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader food service sector when benchmarking catering companies. The chart and table below includes key metrics from sales of food service businesses on BizBuySell.

Comparing catering companies to other businesses in the food service sector surfaces a material discount in typical valuations. Despite outsized financials, earnings multiples tend to fall on the lower end. This is typical of highly competitive businesses with very low barriers to entry, especially in food service, where customers tend to be picky and price sensitive.

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