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Restaurant Valuation

Brock J. Rule

The Valuation Journal, 2015, vol. 10, issue 1, 38-53

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.

JEL-codes: G32 R31 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:vaj:journl:v:10:y:2015:i:1:p:38-53