Café and restaurant valuation
Most Australian cafés and restaurants sell for 1.8 to 3.0 times normalised EBITDA, with the lease term and whether the owner works the floor deciding where inside that band the business lands.
Hospitality carries the lowest multiples of any sector we value, and for a defensible reason: earnings are thin relative to turnover, wage costs move with awards, and most of the goodwill sits in a lease that eventually expires. A valuation that ignores the lease is not a valuation.
Quick answer
What is a café or restaurant worth?
Normalised EBITDA multiplied by 1.8× to 3.0×, then cross-checked against the depreciated market value of the fit-out and equipment, which sets the floor. A venue with five-plus years of lease term, a manager running service and wages under 30 per cent of revenue reaches the top of the band. An owner-operated shop with two years to run rarely clears the value of its equipment.
What moves the number
The five things that decide a hospitality multiple
Buyers in this sector price risk almost entirely around occupancy and labour. Everything else is secondary.
| Factor | Pushes toward the top | Pulls toward the bottom |
|---|---|---|
| Lease term and options | Five or more years remaining including options, at a market rent with assignable terms | Under three years, an above-market rent, or a landlord with demolition or relocation rights |
| Owner involvement | A venue manager and head chef on employment agreements, owner off the roster | Owner cooking or on the floor forty hours a week with no replacement costed in |
| Wage ratio | Wages under 30 per cent of revenue with a stable roster and low turnover | Wages above 35 per cent, heavy penalty-rate exposure, unrecorded cash wages |
| Trading pattern | Multiple day-parts, consistent trade across the week, licensed with a beverage margin | A single peak, weather or event dependence, or one strong trading year in three |
| Fit-out and equipment | Recent fit-out, compliant grease and exhaust, equipment with life left | Ageing fit-out that a buyer must replace, non-compliant kitchen, deferred repairs |
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Lease term and options
↑ Five or more years remaining including options, at a market rent with assignable terms
↓ Under three years, an above-market rent, or a landlord with demolition or relocation rights
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Owner involvement
↑ A venue manager and head chef on employment agreements, owner off the roster
↓ Owner cooking or on the floor forty hours a week with no replacement costed in
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Wage ratio
↑ Wages under 30 per cent of revenue with a stable roster and low turnover
↓ Wages above 35 per cent, heavy penalty-rate exposure, unrecorded cash wages
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Trading pattern
↑ Multiple day-parts, consistent trade across the week, licensed with a beverage margin
↓ A single peak, weather or event dependence, or one strong trading year in three
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Fit-out and equipment
↑ Recent fit-out, compliant grease and exhaust, equipment with life left
↓ Ageing fit-out that a buyer must replace, non-compliant kitchen, deferred repairs
Normalising the earnings
What comes out of a café P&L before it can be valued
Hospitality accounts carry more owner-benefit expense than almost any other sector. Normalising is where the real earnings appear — and where an overstated add-back gets a valuation rejected.
How the earnings method works →- Owner and family wages Replaced with a market wage for every role the owner and family actually perform
- Related-party rent Where the owner also owns the premises, rent is brought to a market rate
- Personal motor vehicle and phone Only the genuinely private portion, evidenced from the ledger
- Fit-out and refurbishment costs Capital spend miscoded as repairs, added back and treated as capex
- Staff meals and personal food cost Assessed against food cost percentage rather than accepted as claimed
- One-off closures and events Flood, renovation or COVID-period trading disruption, isolated and disclosed
Worked example
Worked example: a suburban Brisbane café
Turnover is $1.35m with reported profit of $118,000. The owner draws $65,000 but works six days as barista and manager — a replacement costs $95,000 including on-costs, so $30,000 comes off, not on. A $22,000 kitchen refit coded to repairs is added back as capital.
Normalised EBITDA lands at $110,000. The lease has four years plus a five-year option at market rent and a second barista runs three days, so the venue is not wholly owner-dependent — supporting 2.4× rather than the bottom of the band.
$264,000, cross-checked against $180,000 of depreciated fit-out and equipment
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What a buyer, a bank or an opposing expert will test first
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01
The lease, first
Term, options, rent review mechanism, assignment clause and whether the landlord will consent. A buyer who cannot secure the site is buying equipment.
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02
Unrecorded cash
Cash sales that never reached the BAS cannot be valued. We can only value what is documented, and asking us to assume otherwise ends the engagement.
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03
Wage compliance
Underpaid award wages inflate historical earnings and create a liability. Normalisation restores the compliant cost and the multiple reflects the exposure.
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04
Equipment ownership
Coffee machines, POS and cool rooms are frequently leased or supplier-owned. Anything not owned comes out of the asset schedule.
Questions
Café and restaurant valuations, answered
Broader questions are on the full FAQ page.
Ask a valuerCautiously. With under three years remaining and no options, the earnings stream a buyer is purchasing is short, so the multiple compresses toward the value of the fit-out and equipment. Where the landlord will grant a new term before settlement, that changes the answer materially — which is why we ask about the lease before anything else.
Profit. Turnover multiples circulate in hospitality — often quoted as a share of annual sales — but they ignore food cost, wage ratio and rent, which are precisely what separate a profitable venue from a busy one. We value on normalised EBITDA and use any turnover-based rule of thumb only as a sanity check.
Yes, where it is transferable and the beverage margin is real. A licence supports a higher multiple because it broadens the day-parts and lifts gross margin. The licence itself is also an identifiable asset and is listed separately in the asset schedule.
Brand recognition matters only to the extent it survives a change of owner and stays with the site. A venue known for its chef carries goodwill that walks out the door; a venue known for its location and consistency carries goodwill that transfers. The report distinguishes the two rather than treating goodwill as one number.
The valuation must be written to the Federal Circuit and Family Court expert evidence rules, the add-backs must be individually evidenced rather than asserted, and personal versus transferable goodwill becomes the central contested issue. See our family law valuation page for how those engagements run.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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