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Restaurant Valuation

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  • Brock J. RULE

Abstract

This article looks at the valuation parameters in the restaurant market. The restaurant market employs an excess earnings method with three variables: market rent, a real estate capitalization rate, and a business multiple. Selection of a market rent con-siders rent-to-sales ratios, rent coverage ratios, and market comparables - the goal being affordability. The business is valued by applying a multiple to the cash flow remaining after a deduction for rent (i.e., the "excess earnings"). The value of the enterprise is the sum of the value of the real estate and the value of the business.

Suggested Citation

  • Brock J. RULE, 2015. "Restaurant Valuation," The Valuation Journal, The National Association of Authorized Romanian Valuers, vol. 10(1), pages 38-53.
    • Handle: RePEc:vaj:journl:v:10:y:2015:i:1:p:38-53
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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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