The Short Answer
Most independent restaurants sell for roughly 1.5x to 3x Seller's Discretionary Earnings (SDE), which often works out to about 25% to 40% of annual revenue. A profitable neighborhood restaurant earning $150,000 in SDE typically sells for $225,000–$450,000. Established, semi-absentee, or well-located concepts with a strong lease reach the top of that range; owner-dependent, marginal restaurants sit at the bottom — or sell for little more than the value of the equipment.
Restaurants carry lower multiples than most industries for a reason: high failure rates, thin margins, heavy owner involvement, and total dependence on a lease the buyer doesn't control. Understanding those risks is the key to pricing yours correctly.
Get a confidential, no-obligation valuation of your restaurant based on your real numbers — not a generic online estimate.
How Restaurants Are Valued
Restaurants are valued primarily on a multiple of SDE, with a sanity check against a percentage of sales and the value of the fixtures, furniture, and equipment (FF&E). Because so many restaurants run nearly break-even on paper, add-backs matter enormously — owner salary, family payroll, personal vehicles, and one-time costs all get added back to reveal the true owner benefit.
When a restaurant has little or no provable profit, it often trades on asset value plus goodwill instead: the cost to build out the space, the equipment, and whatever a buyer will pay to step into a turnkey, permitted location rather than build from scratch.
Restaurant Valuation Benchmarks
| Restaurant profile | Typical value | Basis |
|---|---|---|
| Marginal / owner-run, little profit | Asset value + modest goodwill | FF&E and turnkey premium |
| Profitable independent, owner works in it | 1.5x–2.5x SDE | ~25%–35% of sales |
| Established, strong lease, semi-absentee | 2.5x–3x SDE | ~30%–40% of sales |
| Franchise / proven multi-unit | 3x–4x+ SDE or EBITDA | Brand, systems, financing |
A full-service independent restaurant almost always sells for a lower multiple than a franchised quick-service unit with the same profit, because the franchise brings a proven system, brand, and lender-friendly track record.
What Drives a Restaurant's Value Up or Down
What pushes the value up
- A long, assignable lease at a below-market rate with renewal options — often the most valuable single asset
- Provable, add-back-adjusted profit on clean books
- Semi-absentee operation with trained managers and staff
- Strong location, parking, visibility, and delivery/catering revenue
- Full liquor license (Type 47) in California — valuable and transferable
What drags the value down
- Short lease, no options, or a landlord who won't assign — a deal-killer
- Owner is the chef, manager, and face of the business
- Declining sales or heavy reliance on one delivery app
- Cash sales that can't be documented — you can't sell profit a buyer can't verify
- Deferred equipment and looming health-code or ADA issues
Restaurant Values in Los Angeles
In Los Angeles and the surrounding market, the lease drives everything. Prime real estate, high rents, and competitive demand for permitted restaurant space mean a turnkey location with a good lease can be worth more than the business operating inside it. California-specific factors also weigh heavily: a transferable Type 47 liquor license carries real standalone value, and buyers scrutinize compliance with California wage-and-hour, tip, and meal-break rules. Sellers who resolve lease-assignment terms and liquor-license transfer before listing consistently close faster and at higher prices.
Example: Why the Lease Matters More Than You Think
Two restaurants each earn $150,000 in SDE. Restaurant A has 8 years left on a below-market, fully assignable lease with two 5-year options; it sells for about 2.5x — $375,000. Restaurant B has 14 months left, no options, and a landlord demanding a rent increase to assign; buyers walk, and it ultimately sells for little more than equipment value. Same food, same profit — the lease made one sellable and the other nearly worthless.
Frequently Asked Questions
How much is a restaurant worth?
Most independent restaurants sell for 1.5x to 3x Seller's Discretionary Earnings (SDE), which is often about 25% to 40% of annual sales. A restaurant earning $150,000 in SDE typically sells for $225,000 to $450,000. Marginal restaurants with little profit trade closer to the value of their equipment plus a turnkey premium.
What percentage of sales does a restaurant sell for?
As a rough sanity check, many restaurants sell for about 25% to 40% of annual revenue, though the primary method is a multiple of SDE. A restaurant doing $1M in sales might sell in the $250,000 to $400,000 range depending on profitability, lease, and owner dependency.
Why do restaurants sell for such low multiples?
Restaurants carry lower multiples because of high failure rates, thin margins, heavy owner involvement, and total dependence on a lease the buyer does not control. Franchised and semi-absentee restaurants with strong leases command higher multiples than owner-run independents.
How important is the lease when selling a restaurant?
Extremely important, often the single most valuable factor. A long, assignable, below-market lease with renewal options can be worth more than the profit itself, while a short lease with no options or an uncooperative landlord can make an otherwise profitable restaurant nearly impossible to sell.
What Is Your Restaurant Worth?
Get a confidential, no-obligation valuation of your restaurant from a broker who understands leases, liquor licenses, and the Los Angeles market. No pressure, just a straight answer.
Request a Confidential Valuation Call or text: 818-633-3254 · 365navarro.martin@gmail.com