Every owner carries a number in their head. It’s usually built from what the place cost to create, how many years of life went into it, and what a similar restaurant supposedly sold for a few towns over. That number is almost never the market’s number, and the gap between the two causes more bad exit decisions than anything else in this book.
There isn’t one value. There are three, and which one applies depends entirely on the circumstances of the sale.
Value one: the going concern
A running restaurant with staff, customers, and cash flow sells as a business. The standard yardstick for small owner-operated businesses is a multiple of seller’s discretionary earnings — the cash flow available to one working owner, meaning profit plus the owner’s own compensation and perks added back. For independent restaurants, that multiple typically runs somewhere around one and a half to two and a half times, with the range driven by lease quality, books quality, and how dependent the place is on the owner personally. As a rough cross-check, healthy independents often trade around a quarter to forty percent of annual revenue.
Notice what drives that number: provable cash flow. Messy books, unreported sales, and owner expenses tangled through the business all shrink the multiple, because a buyer can’t pay for what can’t be verified. The cleanup work from the earlier chapters isn’t just operational hygiene — it’s literally the thing that makes your business saleable.
Notice also what doesn’t drive it: what you invested. The market pays for the cash flow that exists now, not the money or years it took to build.
Value two: the assets
Now the brutal one. If the restaurant isn’t sold as a running business — it closes, and the contents are sold — the value is the auction value of used restaurant equipment, and that market is merciless. Equipment typically fetches on the order of ten to twenty cents on the original dollar even when relatively fresh, and old equipment goes for close to scrap. A kitchen that cost six figures to build twenty years ago can bring low single-digit thousands at a forced sale. The build-out itself — the hood, the walk-in, the plumbing — mostly belongs to the building and transfers to nobody.
Every owner should compute this floor value honestly, because it’s the answer to “worst case, I’ll just close and sell everything.” For most established independents, the honest answer is: that path recovers almost nothing. Which is worth knowing before it gets relied on as the backup plan.
Value three: the specific buyer
The same restaurant is worth different amounts to different buyers. To a stranger, it’s worth the going-concern math above, discounted for every risk they can’t verify. To the operator two doors down who wants a second location, the equipment in place, and your lease — it can be worth meaningfully more, because they’re buying things that would cost them real money and a year of delay to recreate. A relevant anchor: building a new restaurant from a shell routinely runs several hundred thousand dollars before the first order is rung. For a turnkey operating location, that replacement cost quietly supports value that the earnings math alone might not.
This is why “quietly ask the two or three most likely operators” often beats a public listing for a small restaurant — the best buyer usually already knows your block.
The subtractions owners forget
Whatever the sale price, the owner doesn’t pocket it. Subtract, in roughly this order:
- Secured debt. Equipment loans and any lender with a filed lien on the business assets gets paid from the sale before you do. If cash advances or loans filed liens, they’re in this line.
- The landlord’s consent. Most leases require it for an assignment, and a sale without a transferable lease is a sale of equipment, not a business. This is why the previous chapter’s relationship matters.
- Broker fees and taxes, if applicable.
A distressed restaurant carrying heavy debt can easily produce a sale price that’s entirely consumed by the payoff column — a real transaction in which the owner nets zero. Knowing that in advance changes which path makes sense, which is exactly the decision the next chapters take up.
The point
Compute all three of your numbers — going concern, asset floor, and best-specific-buyer — before distress forces the question. Owners who know their numbers choose between real options. Owners who don’t choose between fantasies, and the market grades fantasies harshly.
If you want help running these numbers on your own operation, book a time.