Restaurant Business Valuation Benchmarks

Restaurant 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 restaurant businesses relative to industry standards.

See also: Bar Businesses and Breweries

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Highlights of Restaurant Businesses Sold on BizBuySell

Restaurants listed and sold on BizBuySell are comprised primarily of small, locally owned businesses offering a wide range of concepts and cuisines. A small portion of these restaurants are franchise units, though not enough to materially affect average financial values. Some of the most popular types of restaurants sold include American restaurants, pizzerias, diners, Mexican restaurants, sushi restaurants, and Italian restaurants.

Restaurant Business Transaction Trends

The median value for restaurants had been flat prior to the pandemic, which forced many restaurant businesses to close their doors. In the years since the height of the pandemic, average values of surviving restaurants rose 25% from $180,000 to $225,000.

Transaction volumes fell in the years after the pandemic, likely due to many restaurant businesses closing due to the strict quarantine and social distancing protocols. While transactions have increased every year after 2020, volume remains nearly 20% below pre-pandemic levels.

Restaurant 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. Restaurant valuation multiples are relatively consistent, though they did fall 5-10% during the height of the pandemic. In 2022 and 2023, multiples for those restaurants that survived the pandemic increased around 15% to new highs, then leveled off in 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 restaurant 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. Local business sale comps by sales class suitable for pricing and negotiations are available in BizBuySell's Business Valuation Report.

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, low 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 restaurant businesses are valued and sold between 1.3 and 2.5 times their annual seller discretionary earnings, with 25% of exceptional, higher volume restaurant businesses trading above this range, and 25% of smaller, less competitive restaurants 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 restaurant business financial ranges useful for comparing a given restaurant business to the broader market.

Restaurant Business Revenue and Earnings Trends

Median small restaurant business sales growth plateaued during the pandemic, rebounded in 2022, then settled in 2024, reaching $720,000 – a 20% increase above pre-pandemic levels. Owner’s discretionary earnings grew in step, though at slower rates, reaching a median of $125,000, or about 15% higher than pre-pandemic median earnings. These thinner margins are likely a sign of greater competition among restaurants that survived, as well as ongoing cost of goods increases associated with global inflation.

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 restaurant businesses traded on the business for sale market. Below you will find discretionary earnings ranges for restaurants sold over the past five years, as well as recent restaurant 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 restaurant 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. Restaurants that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a restaurant generating over $1MM in revenue may command an earnings multiple around 2.5, while a smaller restaurant with sales below $500k may trade below 1.5 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.

Restaurant and 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 restaurants. The chart and table below includes key metrics from sales of food service businesses on BizBuySell.

Compared to other businesses in the food service sector, restaurant business valuations are about average. Restaurant businesses trade at high volumes compared to other types of small businesses selling in the market, so there is significant pressure on valuations to stay competitive. Even so, all businesses in this sector tend to fetch higher earnings multiples as their revenue volume increases, so the primary factor driving valuation multiples among all food service businesses is sales volume.

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