I am trying to buy franchise restaurant. Last 12 month net sale is $ 540,000.
Owner makes $ 80000 with his salary included.
So how much should be the business value be ?
And how much should I pay ?
To value the business, you’ll want to figure out what the industry multiple is for the restaurant industry and then multiply your revenue, gross revenue, or operating revenue by that multiple.
For example, if the restaurant industry has a 2x sales multiple, then the business franchise would be worth $1.8 million. However, often times an operating revenue multiple is the best for valuing a business. This is because you can remove such items as the $80k owner’s salary.
I would find out what the average price multiple of a restaurant’s operating revenue is, and then value it that way. Typically, the multiple is somewhere around 2x sales.