by Aaron Allen
Restaurant Consultant, Speaker & Industry Analyst
Aaron Allen & Associates
During the pandemic, restaurant valuations climbed. This was related to increased liquidity, prompting stock prices in public markets, coupled with low margins and revenue which were not reflected in enterprise value adjustments. Valuation ratios were maintained artificially high. In 2022 they started to go back to pre-pandemic levels, but valuations for public companies in the U.S. have climbed back up in the first half of 2023.
Valuation ratios are not all that matters at the moment of a restaurant chain acquisition. The definition of a Normalized EBITDA was shaken by the pandemic, and this affects the enterprise value as much as the valuation ratio. At the same time, the trends that will impact sales and cost effects on margins have a different dynamic post-pandemic that needs to be analyzed with due diligence to reduce the risk inherent in the assumptions that go into valuation models.
Whether selling a restaurant chain, buying a restaurant, or considering foodservice investments in general, the key takeaways shared here will help restaurant owners and investors get an accurate idea of where restaurant valuation multiples are now and will likely be in the future.
Aaron Allen & Associates works alongside senior executives of the world’s leading foodservice and hospitality companies to help them solve their most complex challenges and achieve their most ambitious aims, specializing in brand strategy, turnarounds, commercial due diligence and value enhancement for leading hospitality companies and private equity firms.
Clients span six continents and 100+ countries, collectively posting more than $300b in revenue. Across 2,000+ engagements, we’ve worked in nearly every geography, category, cuisine, segment, operating model, ownership type, and phase of the business life cycle.
