Restaurant Valuation Calculator
Restaurants operate on thin margins. Calculate valuation for sale, purchase, or investment decisions.
How the Restaurant Valuation Calculator works
Value restaurants using revenue multiples, EBITDA methods, and asset approaches. Consider location, concept, and lease terms.
Restaurant valuation requires industry knowledge. This calculator applies food service-specific methods accurately.
How it works
Tutorial
Restaurant valuation combines art and science because intangibles like location, reputation, and concept viability matter as much as financial metrics. While EBITDA multiples provide a starting framework, factors like lease terms, equipment condition, customer concentration, and transferability of goodwill significantly impact actual value. Understanding both the financial and operational drivers helps buyers avoid overpaying and sellers maximize proceeds.
You have two options: use the calculator above for comprehensive restaurant valuation with industry-specific adjustments, or follow this manual guide to value a restaurant business.
The Formula
| Method | Formula |
|---|---|
| EBITDA Multiple | Adjusted EBITDA × Multiple (2-4x) |
| Revenue Multiple | Annual Revenue × 0.25-0.75 |
| Asset-Based | Equipment Value + Inventory + Goodwill |
| Seller’s Discretionary Earnings | SDE × Multiple (1.5-3.0x) |
Step-by-Step Calculation
Let’s value a restaurant using multiple methods for triangulation.
Step 1: Calculate Seller’s Discretionary Earnings (SDE)
Reconstruct owner’s true benefit from the business:
| Financial Item | Amount |
|---|---|
| Annual Revenue | $1,200,000 |
| Cost of Goods Sold (32%) | -$384,000 |
| Labor (28%) | -$336,000 |
| Rent | -$120,000 |
| Other Operating Expenses | -$180,000 |
| Net Profit (before adjustments) | $180,000 |
| Add: Owner’s Salary | +$75,000 |
| Add: Owner’s Health Insurance | +$12,000 |
| Add: Personal Auto Expense | +$8,400 |
| Add: Excess Owner Meals | +$6,000 |
| Seller’s Discretionary Earnings | $281,400 |
Calculation: $180,000 + $75,000 + $12,000 + $8,400 + $6,000 = $281,400
Step 2: Determine Appropriate SDE Multiple
Assess business quality factors:
| Factor | Assessment | Multiple Impact |
|---|---|---|
| Base Restaurant Multiple | Standard | 2.0x |
| Lease (8 years remaining) | Good | +0.3x |
| Concept (Italian, established) | Solid | +0.2x |
| Location Traffic | Excellent | +0.3x |
| Revenue Growth | Flat | +0.0x |
| Online Reviews (4.5 stars) | Strong | +0.2x |
| Applied Multiple | 3.0x |
Calculation: 2.0 + 0.3 + 0.2 + 0.3 + 0.0 + 0.2 = 3.0x
Step 3: Calculate SDE-Based Valuation
Apply multiple to seller’s discretionary earnings:
| Component | Value |
|---|---|
| Seller’s Discretionary Earnings | $281,400 |
| SDE Multiple | × 3.0 |
| SDE Valuation | $844,200 |
Calculation: $281,400 × 3.0 = $844,200
Step 4: Calculate Revenue Multiple Valuation
Apply simpler revenue-based method:
| Component | Value |
|---|---|
| Annual Revenue | $1,200,000 |
| Revenue Multiple (full-service) | × 0.50 |
| Revenue Valuation | $600,000 |
Calculation: $1,200,000 × 0.50 = $600,000
Reasoning: Full-service restaurants typically trade at 0.4-0.6x revenue; 0.5x is mid-range.
Step 5: Calculate Asset-Based Valuation
Value tangible and intangible assets:
| Asset Category | Value |
|---|---|
| Kitchen Equipment | $180,000 |
| Furniture & Fixtures | $45,000 |
| POS System & Tech | $15,000 |
| Liquor License | $50,000 |
| Inventory (food/bev) | $22,000 |
| Goodwill/Customer Base | $250,000 |
| Total Asset Value | $562,000 |
Calculation: $180K + $45K + $15K + $50K + $22K + $250K = $562,000
Step 6: Adjust for Lease Terms
Factor in critical lease considerations:
| Lease Factor | Impact |
|---|---|
| Market Rate Rent | $12,000/mo |
| Actual Rent | $10,000/mo |
| Monthly Savings | $2,000 |
| Years Remaining | 8 years |
| Present Value of Savings (6% discount) | +$150,000 |
Reasoning: Below-market rent adds significant value; $2,000/month savings over 8 years is worth approximately $150,000 in present value.
Step 7: Triangulate Final Valuation
Weight different methods for final value:
| Method | Value | Weight | Weighted Value |
|---|---|---|---|
| SDE Method | $844,200 | 50% | $422,100 |
| Revenue Method | $600,000 | 20% | $120,000 |
| Asset Method | $562,000 | 30% | $168,600 |
| Weighted Average | $710,700 | ||
| Add: Lease Premium | +$75,000 | ||
| Final Valuation | $785,700 | ||
Calculation: $422,100 + $120,000 + $168,600 + $75,000 = $785,700
Step 8: Create Negotiation Range
Establish realistic offer parameters:
| Valuation Level | Amount | Use Case |
|---|---|---|
| Floor (Asset-based) | $562,000 | Minimum acceptable |
| Conservative | $700,000 | Opening buyer offer |
| Fair Market Value | $785,700 | Target deal price |
| Optimistic (SDE) | $844,200 | Seller asking price |
| Negotiation Range | $700K-$825K |
Final Answer: The restaurant valuation is approximately $785,000, with a reasonable negotiation range of $700,000-$825,000
What This Means
At $785K on $1.2M revenue (65% of sales), this valuation reflects strong fundamentals: solid SDE, excellent location, favorable lease, and transferable concept. The 3.0x SDE multiple is above industry average, justified by location and lease advantages. Buyers should verify that revenue and customer base will transfer post-sale, as personal relationships often drive restaurant success.
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