Accurate restaurant valuation is a critical aspect of any transaction, whether you are buying or selling a business. For the seller, an inaccurate valuation can lead to financial losses against the true value of the business. For the buyer, the result of a poor restaurant valuation means you could be overpaying for the opportunity. It is a risk for both buyers and sellers when a restaurant’s value is misjudged.

Understanding the true value of a restaurant involves more than just looking at its financial statements; it requires deep industry knowledge and expertise. In this article, we will explore the training required to become a Certified Restaurant Broker at We Sell Restaurants, focusing on how mastering restaurant valuation sets this elite set of brokers apart from the industry to ensure successful outcomes for clients.

👉What is a Certified Restaurant Broker?

A Certified Restaurant Broker is a highly trained professional who specializes in the complexities of buying and selling restaurants. Unlike general business brokers, Certified Restaurant Brokers possess specialized knowledge of the restaurant industry, allowing them to navigate the unique challenges and opportunities within this sector. The certification process involves rigorous education and training, covering topics such as valuation, financial analysis, and market trends, all of which are essential for successful transactions. In addition, these brokers are using comparable sales analysis from the brand selling more restaurants in the space than anyone else. Clients, working with Certified Restaurant Brokers receive expert guidance, accurate valuations, and industry-specific insights, resulting in smoother transactions and more favorable outcomes.

Restaurant valuation is critical for buyers who are obtaining lending for the purchase using Small Business Administration or SBA lending. In 2022, the largest percentage of SBA 7(a) approvals were for Accommodations and Food Services for a total of 6,297 loans and 13.2% of all loans but 19.2% of all loan dollars for the year.

In all these instances, the bank orders and relies upon a third-party valuation to verify the lending amount. If the loan is to be funded, the independent assessment must match or exceed the sales price. Those who rely on brokers without sufficient experience to do restaurant valuations can be deep into the process of buying before learning their deal is not eligible for financing, something that is avoided with a knowledgeable and experienced resource.

 👉The Role of a Valuation Expert

Restaurant valuation is the process of determining the true financial worth of a restaurant, taking into account a range of factors such as earnings, assets, and owner benefit derived from the business. Accurate valuation looks at reasonable and customary expenses and may also add back certain non-recurring transactions incurred in a fiscal year such as a large legal bill for a one-time lawsuit, a large single expense for accounting in a year with an audit or a replacement or repair of equipment. These non-recurring expenses are not likely to occur in the future years, thus, they are added back to the baseline earnings of the business.

Accurate evaluation and recasting is the cornerstone of successful transactions and sets the foundation for negotiations between buyers and sellers. For buyers, knowing the precise value of a restaurant ensures they are paying a fair price and investing wisely. For sellers, it means pricing their restaurant competitively to attract serious offers. Without proper valuation expertise, common mistakes—such as overvaluing or undervaluing a restaurant—can occur, potentially leading to lost deals, extended time on the market, or financial losses.

👉Core Components of Valuation Training

Valuation training for Certified Restaurant Brokers focuses on mastering several key components that are crucial for accurate assessments. The first is financial analysis, which involves a deep understanding of financial statements like profit and loss reports and balance sheets. Brokers must also be proficient in identifying key financial ratios specific to the restaurant industry, such as labor costs and food cost percentages.

Evaluating appropriate addbacks, is another skill developed through the training program, along with pulling comparable pricing for similar sales. Restaurant valuations must also consider the implications of the lease. A lease priced under current market rates creates additional value for the location as long as there is additional term and option years available. Conversely, a seller who owns the real estate and doesn’t book rent to the profit and loss statement, devalues the business, since the new owner must pay an occupancy cost, cutting into available cashflow. Understanding what is on the financial records and properly interpreting those documents enables brokers to deliver precise and insightful valuations.

👉Tools and Resources Used by Valuation Experts

Certified Restaurant Brokers rely on specialized software developed by the We Sell Restaurants system called the BOSS or Broker’s Operations and Sales System. The system models the accurate valuation and provides access to comparable sales for accurate valuation and data-driven insights. Case studies, peer review, franchise oversight and real-world applications are also critical, as they offer practical examples of how proper valuation has successfully advanced deals or saved transactions that were at risk. These tools and resources, combined with experience, make valuation experts indispensable in restaurant transactions.

👉How Certification Enhances Valuation Skills

Becoming a Certified Restaurant Broker involves specialized training that directly enhances valuation skills. This training includes a variety of courses and seminars specifically designed to cover the nuances of restaurant transactions and valuation methods. Brokers learn to apply their knowledge through real-world experience, working alongside mentors and industry professionals who guide them in understanding the complexities of financials, assets, and market comparisons. The certification process doesn’t stop with initial training; continuing education ensures that brokers stay updated on the latest industry trends and valuation techniques. Networking and peer learning also play a significant role, offering brokers the opportunity to exchange insights and best practices with other experts, which further refines their valuation expertise over time.

👉The Future of Valuation in Restaurant Brokerage

The future of restaurant valuation is evolving, driven by shifts in the industry and advancements in technology. New restaurant models, such as delivery-only kitchens and food trucks, are changing how brokers assess value, requiring updated methods that reflect these trends. Additionally, technological innovations like data analytics and artificial intelligence are becoming increasingly valuable in providing more accurate, predictive valuations. These tools allow brokers to analyze larger data sets and foresee market changes with greater precision. As the restaurant industry continues to evolve, ongoing education and staying attuned to new valuation techniques will be essential for brokers to maintain their expertise and provide clients with the most reliable insights.

Becoming a Certified Restaurant Broker with expertise in valuation is essential for those looking to provide exceptional service in the restaurant brokerage industry. Accurate valuation is the foundation of successful transactions, ensuring that both buyers and sellers are confident in their decisions. The specialized training, hands-on experience, and continuing education involved in becoming a valuation expert not only enhance a broker’s skills but also set them apart in a competitive market. If you're serious about advancing your career and offering unparalleled value to your clients, pursuing certification is a critical step. In the long run, mastering restaurant valuation elevates the industry as a whole, creating more transparent, efficient, and successful transactions.

Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.