Restaurant Valuation, Why It’s Important
Successful restaurant owners know a lot about operating their business. They know about food, menu designs and, most importantly, custom service. Some even know about restaurant accounting. What most restaurant owners know little, if anything about is “what is my restaurant worth”. This information may not be something a restaurant owner uses every day in the operation of the business however it is information that can prove invaluable at certain times.
The most common need for a restaurant owner to need to know the value of their restaurant is to obtain financing for expansion or purchasing another restaurant. An investor or lender will want to know the value of the current operation. An investor will use the information to evaluate the return they can reasonably expect to earn from their investment while a bank will potentially use the value of the business as collateral to support a loan.
An owner may decide to sell their restaurant. The only way to determine a reasonable asking price is to have a professional restaurant valuation performed.
A restaurant owner may want to apply for a franchise or obtain another franchise. The franchisor will want to know the restaurant worth of the current operation in order to determine if the operation falls within its franchising guidelines.
Taxation and estate planning is another reason a restaurant owner will want to know the value of their restaurant. Although a restaurant valuation may not be important for annual tax returns, it is important when consider the tax ramifications of selling or refinancing. It is also very important to know for estate planning purposes so proper steps can be taken to mitigate the tax burden of the owner’s estate should the owner pass away.
A restaurant’s value is more than just the combined value of the assets, such as the furniture, fixtures and equipment, less any debts. The value also incorporates the profitability and the cash flow of the operations into the calculations. Other items that may affect the value of a restaurant are real estate ownership, a franchise agreement, favorable lease terms and a host of other factors.
Determining what is a restaurant worth for an owner is not an exact science. The professionals at Jeff Garcia, CPA use great restaurant accounting skills, the most widely accepted valuation methods and the latest information to provide their clients with the most accurate restaurant valuation available.
If you would like to know more about how Jeff Garcia, CPA can help you determine what your restaurant is worth, please call us Toll Free at (888) 933-food(3663) or (713) 621-1142.