Most independent restaurants sell to an individual buying a business and a job — and price on SDE, not EBITDA. See what a buyer really prices: whether the food survives you leaving, your lease term and rent as a % of sales, how much margin third-party delivery is eating, and whether the books declare every sale.
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If you're the chef, the face, and the only recipe-holder, a buyer is buying risk, not a business. The single biggest driver of value is whether the kitchen runs without you — documented recipes and prep specs, and a general manager who opens and closes. An owner/chef-dependent location prices on SDE at the bottom of the band, because the buyer is really buying a job.
A buyer diligences lease term, renewal options, the assignment clause, and rent as a % of sales before almost anything else. The rule of thumb is occupancy ~6–10% of sales and rent alone ideally ≤6% — above ~10% impairs profit. A short, non-transferable, or expensive lease is a direct price cut, because the buyer can't keep the location or the rent that makes the numbers work.
DoorDash, Uber Eats, and Grubhub commissions run ~15–30% (effective 30–40% all-in once you add fees). A heavy delivery mix makes your top line look healthier than the real margin, so a sharp buyer normalizes earnings down for it — every delivery dollar is worth less than a dine-in dollar. A restaurant leaning on commission delivery for its sales story gets repriced.
Only ~45–48% of operators reported rising same-store sales in recent windows, so a sliding or flat trend isn't unusual — but a buyer discounts it. Three years of declining covers or sales reads as a fading concept and caps the multiple, while a stable or growing same-store trend supports it.
Three earnings-quality items a buyer probes. Unreported cash sales can't be banked at sale and raise a quality-of-earnings flag that taints every other number. Paying cooks or servers as 1099 contractors is usually misclassification — the IRS control test makes them employees — so it's a back-tax-and-penalty liability, and it understates labor, which overstates EBITDA (a buyer adds the real payroll burden back). And deferred equipment capex — a worn hood, walk-in, HVAC, or ovens — is a lumpy bill that comes off the price. All three are fixable before you go to market.
Each lever is sized for a illustrative single owner-run full-service location, ~$2m revenue at a thin ~7% owner-normalized margin (restaurants run ~3–8% net; only ~42% were profitable in 2024) after a market food-service-manager wage; the engine uses the seller's computed sde/ebitda — about $150K EBITDA. Same number whether we frame it as “what a buyer discounts” or “what you keep by fixing it.”
The biggest driver of value: install a general manager who opens and closes without you, and document recipes and prep specs so the kitchen runs without the owner/chef. The same work converts personal goodwill — value tied to you — into enterprise goodwill a buyer keeps: a name, online reviews, and a catering/loyalty following that aren't just your reputation. It's hard and takes 12–24 months, but it moves a single location off the bottom-of-band SDE price toward the manager-run, transferable-brand market buyers pay up for.
adds about 0.3–0.6× to your multiple · usually takes 12–24 months
Secure a lease with a long remaining term, renewal options, and a clean assignment clause at rent that's a defensible % of sales (occupancy ~6–10%, rent ≤6%) — the lease is often the most important asset a buyer is acquiring. Pair it with getting prime cost (food + labor) to a ≤60–65% target. Both directly protect the thin margin the multiple is applied to.
adds about 0.2–0.4× to your multiple · usually takes 1–6 months
Run everything through the POS and the tax return so earnings are provable — a buyer can only pay for earnings they can verify. Unreported cash can't be added back at sale and poisons trust in the whole P&L. It needs a track record (12–24 months), but provable, declared earnings are what turns a 'trust me' number into a financeable price.
adds about 0.1–0.3× to your multiple · usually takes 12–24 months
Diversify dayparts and grow catering, events, and your own online-ordering/loyalty base — these grow revenue at better margins than commission-heavy third-party delivery. There are no service contracts in this trade, so this repeat-guest and catering base is the closest thing to durable revenue a buyer credits, and it lifts margin instead of eroding it the way delivery apps do.
adds about 0.1–0.3× to your multiple · usually takes 6–18 months
Typical impact ranges blended from lower-middle-market transaction data, sub-$50M M&A databases, and observed consolidator pricing in the $300K–$3M EBITDA band. Directional, not a guarantee — your memo computes your actual numbers from your books.
The metrics buyers grade restaurants on. The diagnostic fills the “your business” column from your actual QuickBooks data.
| Metric | Full-Service Restaurants benchmark | Your business | What it means |
|---|---|---|---|
| Recurring / contracted revenue | Essentially none | Your data | No service contracts — value rides margins, location & running without the owner |
| Gross margin | ~67% | Your data | Pricing and job-costing discipline |
| EBITDA margin | ~5% | Your data | What flows to the bottom line |
| Healthy customer-concentration ceiling | top customer under 10% | Your data | Above it, buyers price the risk |
| Typical industry growth | ~2% / yr | Your data | Beating it can add to your multiple |
| Typical sale multiple | 1.4–4.5× EBITDA | Your data | Where the bidding starts; the levers above move you up |
Benchmarks are blended industry composites, service businesses $1M–$10M revenue, 2026-Q1 — directional, not a precise bar. Your memo measures you against your own books. Connect QuickBooks to fill in your numbers →
The diagnostic arrives as formats you can actually use, plus a private, scoped link to share a curated package with a specific buyer — you decide, card by card, what they see.
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Live formulas, not a dead printout — the path from raw profit to your real number, plus the cash-tied-up scenarios a buyer can stress-test.
Restaurant buyers split sharply by size — most single independents are NOT bought by PE.
Don't price one location as if PE is bidding — the realistic channel is a local broker.
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Most Full-Service Restaurants businesses in the $1M–$10M revenue range trade at roughly 1.4× to 4.5× normalized EBITDA, with a typical deal near 2.3×. Smaller, owner-dependent shops sit at the low end; larger, manager-run businesses with recurring revenue reach the top. Your actual number depends on your books — that's what the diagnostic computes, blending recent lower-middle-market closings, main-street marketplace sales, and academic M&A survey data.
A single owner-run independent restaurant is almost always valued on SDE (seller's discretionary earnings) — your full owner compensation, perks, and one-time items added back — because the realistic buyer is an individual buying a business and a job. Only a multi-unit, manager-run group with repeatable systems and earnings that don't depend on the founder gets valued on EBITDA, at higher multiples. Most independents sell on SDE.
A lot — it's often the single most important asset. A buyer checks the remaining term, renewal options, the assignment clause, and rent as a % of sales (occupancy ~6–10%, rent ideally ≤6%; above ~10% impairs profit). A short, non-transferable, or expensive lease is a direct price cut, because the buyer can't keep the location or the economics. Lock a long, assignable lease at defensible rent before you go to market.
Yes. DoorDash/Uber Eats/Grubhub commissions run ~15–30% (effective 30–40% all-in), so a heavy delivery mix makes your sales look bigger than the real margin. A sharp buyer normalizes earnings down for it — delivery revenue is worth less than dine-in. Growing your own online ordering, loyalty, and catering instead lifts both revenue and margin, which is what a buyer pays for.
Almost never — and it can cost you at sale. Under the IRS control test, restaurant cooks and servers are employees: you set their schedule, recipes, and standards and supply the kitchen. Paying them as 1099 contractors is usually misclassification, and a buyer treats it two ways — as a back-payroll-tax and penalty liability they discount for, and as understated labor that overstates your EBITDA, so they add the real employer payroll burden (taxes, workers' comp) back before applying a multiple. The related watch-item is tipped-wage compliance — the tip credit, tip pooling, and overtime computed on the full minimum wage — a live wage-and-hour class-action area. Clean W-2 payroll and tip practices make your earnings financeable.
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