I love beautiful data, and the data for the restaurant industry valuation multiples is giving me good feelings.
My analysis of the restaurant industry valuation multiples consisted of two different data sets – one for transaction multiples and the other for publicly traded multiples.
And what I mean by beautiful analysis is that even though the transaction multiples data and the trading multiples data are composed of completely different sets of companies, the average and median valuation multiples had similar results.
In simple summary, the average valuation multiples for the restaurant industry is 2.5x revenue multiple, 15x EBITDA multiple, and 33x earnings multiple.
Restaurant Industry M&A Transaction Multiples
In 2022 alone, there were almost 600 M&A transactions in the restaurant industry in the US (Source: Pitchbook, February 2023). And these are only the companies that were reported.
And as you can see in the graph below, about 600 M&A restaurant transactions in the US is a typical number annually.
There was a dip in 2020 as expected but the number of restaurant M&A activity did not get hugely impacted by our pal, corona.
When you look at the details around the restaurant M&A transactions in 2022, the median deal size was approximately $27 million (Source: Pitchbook, February 2023).
This is really great to see from my perspective, because there continues to be a lot of M&A activity with small and medium sized restaurants and not just corporate giants.
Restaurant Industry Valuation Multiples
Breaking down the restaurant industry valuation multiples, the transaction multiples data set included transactions between 2019 and 2022.
The data set includes large cap restaurant transactions such as Red Robin, which has about 550 locations as of early 2023 and smaller restaurant chains such as Kura Sushi which has 43 US locations as of early 2023.
And with trading multiples, the data set ranged from small restaurants that had a revenue under $10 million to giant public companies with revenue over $30 billion.
After eliminating restaurants that did not have data or were outliers, the average restaurant industry valuation multiples are as follows.
- The average restaurant industry revenue multiple ranges around 2.6x – 2.7x.
- The median restaurant industry revenue multiple ranges around 1.6x – 1.7x.
- The average restaurant industry EBITDA multiple ranges around 15.3x – 15.7x.
- The median restaurant industry EBITDA multiple ranges around 12.5x – 15.2x.
- The average restaurant industry earnings multiple ranges around 31.4x – 36.9x.
- The median restaurant industry earnings multiple ranges around 30.0x – 32.6x.
Now do you see what I mean from my intro to this article?
Even though the transaction multiples and the trading multiples are from completely different data sets, the valuation multiples are very similar in range, which help to corroborate each other.
Beautiful data and analysis gives me joy.
How To Use Valuation Multiples To Value a Company
Now that you have the valuation multiple, how do you use it to value a company?
For those who are not familiar with using valuation multiples to value companies or those who are but need a refresher, I wrote posts detailing exactly how you can do that.
Hopefully you can use them as helpful guides. Click on the link below to go to the post.
- How to value a company based on revenue
- How to value a company based on EBITDA
- How to value a company based on earnings
- How to find your own valuation multiples
- Other posts on how to value a company
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