In this article
Sooner or later, every owner asks themselves the same question: what is this business actually worth? A sale, a partner buying in, a divorce, or plain curiosity — the answer that circulates in hospitality is a rule of thumb nobody can actually justify. A real valuation runs three methods at once, and every one of them has real numbers behind it.
"Four times profit" is the answer you get on every hospitality forum, and it isn't wrong — it's just incomplete. Four times which profit? The profit on paper, or what the business hands you on top of a normal wage for the work you do yourself? And what if your restaurant makes little profit but turns over half a million a year — is it worth nothing at all?
An appraiser, a broker or a bank never prices a restaurant off one number. They cross three methods: what the business pays a working owner (the earnings method), what share of revenue the market actually pays for that (the turnover method, or the goodwill benchmark), and what the kitchen and fit-out are still worth if everything were sold tomorrow (the substance method — the equipment). None of the three is the price on its own. Together, they are.
This guide walks through the seven numbers that decide where those three methods meet — the multiple your profit is actually multiplied by, what your kitchen loses every year, how heavily each method is weighted, and why a turnover figure must never be allowed to overrule what you actually keep. Further down, run it with your own revenue, result, wage and equipment.
Everything runs in your own browser: nothing is sent anywhere or saved. This is not an official valuation for a bank or a notary — it's the model a real one is built on, so you know what's happening before you accept a number from someone else.
Why "four times profit" leaves you guessing
The rule of thumb quietly assumes "profit" is the same thing a buyer is actually paying for. It isn't. A buyer is paying for the cash a working owner keeps on top of a normal wage for the work they do themselves — in the trade this is SDE, the seller's discretionary earnings. Add your operating result to your own pay, and you have the figure every buyer is actually pricing.
The second blind spot is turnover. Two restaurants with identical revenue can be worth ten times as much as each other if one runs a 20% margin and the other runs 2%. A turnover percentage is never a second opinion sitting next to the earnings figure — it's a check on it, and the moment it lands further above what the earnings can support, it gets reined back in.
And then there's the kitchen itself. A ten-year-old range still sits on the books at its purchase price, but it hasn't been worth that for years. Without that correction, a buyer pays twice for the same wear: once in the price, and again the day the combi oven needs replacing.
The ultimate guide Restaurant Finance: 6 Numbers That Decide Your Profit Prime cost, cash flow, break-even, RevPASH and ROI — the complete financial system for restaurant owners. Open the guideThe 7 numbers behind your valuation
They build on each other: the first four decide what each method comes out to, the last three decide how those methods actually meet at one price.
1. 1.5× to 3.0× — the multiple your earnings are actually sold on
Take a 55-seat neighbourhood restaurant: €480,000 revenue, €38,000 operating result, and the owner draws €42,000 of their own pay out of it. Together that's €80,000 SDE — the discretionary earnings a buyer is actually pricing. Multiply that by 2.25× and you land on €180,000 for the earnings method.
That 2.25× isn't a fixed number — it's a position inside a band, and the band itself shifts by concept. An ordinary restaurant or brasserie moves between 1.5× and 3.0×. A fast-casual concept, where less of the value rides on skilled service, drops to 1.3×–2.6×. Fine dining, where the goodwill often walks out the door with the chef, sits lowest of all: 1.2×–2.4×.
Where you land inside that band depends on the quality of the business: a waiting list, a team that runs without you, and a lease with years still on it all push your multiple toward the ceiling. A business that leans entirely on the owner pushes it toward the floor — however good the number on paper looks.
2. 20% — what your kitchen loses the day the ink dries
Second-hand catering equipment doesn't behave like a building. A €15,000 combi oven is already down 20% of its value the day it's installed — not wear, just the gap between "new in the box" and "in use", the same way a car loses value the moment it's driven off the lot.
That's why a takeover price is never the same as what was originally paid for the equipment. An inventory line of €180,000 on a seller's books is never worth €180,000 to a buyer — the real value (its depreciated or Zeitwert value) always sits below that, and how far below depends mostly on age.
For a five-year-old kitchen bought for €150,000, the formula further down leaves €70,000 — less than half. That's the figure actually negotiated at takeover, not what was originally paid for it.
3. 12 years, and a 10% floor that's never broken
After that first 20% drop, the value keeps falling in a straight line until it hits 10% of the new price at twelve years — and it stays there, however old the equipment gets. A fifteen-year-old fryer isn't worth nothing; it's still worth a tenth of its new price, as scrap-and-secondhand value.
The curve below shows both stages in one picture: the immediate drop, the straight line down, and the floor that never breaks. Mark your own kitchen's age on it and you'll see exactly where you stand.
This curve holds for second-hand catering equipment across Europe regardless of the currency you're counting in — it's a percentage of the new price, not an amount.
20% gone on day one, then a straight line to a 10% floor after 12 years.
A percentage of the new price, not an amount — the curve holds in any currency and for any second-hand catering equipment.
4. 65 / 25 / 10 — how the three methods are actually weighted, never averaged
The earnings method (€180,000 in our example), the turnover method (€186,000) and the substance method (€70,000) aren't averaged — they're weighted: 65% earnings, 25% turnover, 10% substance. That's 0.65 × 180,000 + 0.25 × 186,000 + 0.10 × 70,000 = €170,500.
That split isn't arbitrary. Earnings carry the most weight because that's what a buyer is actually purchasing: an income. Turnover carries some weight because it checks the earnings figure against the market, but it never leads. The equipment carries the least, because a kitchen alone doesn't sell a restaurant — it's the floor, not the point.
The graphic below sets all three amounts side by side at their real weight, and shows exactly where that lands: a fair value of €170,500.
The earnings, turnover and substance methods at their real weight — never averaged.
The band under the bars shows the fair value and the real-world band of minus 20% to plus 25% around it — the marker sits at the fair value itself.
5. 1.35× — the ceiling a turnover number is never allowed to break
A turnover percentage is a rule of thumb for the market, not a second opinion on your own books. If the turnover method lands more than a third above what your earnings actually support, it's the turnover method that's wrong about this particular business — not your P&L.
In practice: once the turnover method exceeds 1.35 times the earnings method, it's capped there before it enters the blend. In our example the ceiling is 1.35 × €180,000 = €243,000 — comfortably above the €186,000 the turnover method produces, so the cap doesn't bite here.
That ceiling is exactly what makes a turnover-driven asking price ("just ask for 60% of last year's revenue") dangerous for a thin-margin business: without the correction, a buyer pays for revenue that never becomes profit.
6. ±20–25% — why two honest buyers can offer different prices
The €170,500 fair value isn't a price, it's an anchor. Around that anchor sits a real-world band of minus 20% to plus 25% — in our example between €136,400 and €213,125 — and that isn't uncertainty about the arithmetic.
It's the other kind of uncertainty: the state of the lease, how badly this particular buyer wants this particular location, whether there's a queue of would-be successors, and simply how well both sides negotiate. Two honest buyers looking at the exact same numbers can land on opposite ends of that band.
That's also why a valuation is never the final word in a takeover — it's the opening position of the conversation, not the end of it.
7. 0 — what your goodwill is worth the moment your result turns negative
Every formula above assumes the SDE is positive. The moment a business pays its working owner nothing — or worse, costs them money — the entire calculation collapses to exactly one thing: the substance value. No profit, no goodwill, however much revenue is on paper.
That isn't a penalty, it's simple logic: goodwill is the price of future profit, and there's no future profit to pay for. A restaurant turning over €600,000 at a €20,000 loss is worth less in this model than one turning over €200,000 at a €30,000 profit.
For a seller, this is the hardest lesson in the whole article: the number on this year's till receipt doesn't count. What's left after a normal wage does — and that's where every valuation actually starts.
Run it with your own numbers
Enter your own revenue, result, pay and equipment, and the calculator below runs through exactly the same three methods, the same weighting and the same ceiling as above.
The quality slider replaces, for this short model, the six questions the full free valuation tool asks (waiting list, team, lease, trend, competition, condition) with a single estimate — for the precise figure, including a financing ceiling, use that tool after this article.
What's your restaurant worth?
Enter your own numbers — the calculator runs the same three methods, the same weighting and the same ceiling.
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Everything runs in your browser: nothing is sent or saved. For the precise figure — all six quality questions, the lease and a financing ceiling — use the full free valuation tool.
Push the quality slider all the way left, then all the way right, with the same numbers otherwise unchanged — the difference that makes on its own is exactly why "four times profit" was never the whole story.
Now switch the concept to fine dining or fast-casual: with identical numbers, both the multiple and the turnover percentage shift, and so does the whole result.
The conversation this number opens
A valuation isn't an endpoint, it's the opening of a negotiation — with a buyer, a partner, a bank or a notary. What matters is walking in with the same model the other side is using, instead of a rule of thumb nobody can actually defend.
If you're selling within a reasonable timeframe, start now with the figures this calculation actually needs: a clean operating result, your own pay clearly separated out, and a kitchen whose purchase dates and amounts you can still put your hands on.
And if you're on the buying side, use this model to test what a seller is asking — a price that ignores the 1.35× ceiling, or that leans on last year's turnover instead of what's actually left over, is a price worth running through this calculation again.