Prices paid for restaurant businesses slipPrices paid for restaurant businesses slip

Alan J. Liddle

BizBuySell.com, an online marketplace for businesses, offered a look at third-quarter trends for restaurants listed for sale on its site, including a drop in the median prices paid compared with the second quarter.

Mike Handelsman, group general manager for San Francisco-based BizBuySell.com, said transactions for all categories of small businesses have slowed, which "suggests that the business-for-sale marketplace has flat-lined."

“Unfortunately, the signs of recovery that we saw earlier this year are stalling out in the second half of 2010,” he said.

Data released by BizBuySell.com showed the number of restaurants nationwide listed for sale in the third quarter was 5,488, which was down 1 percent compared with the second quarter, down 8.6 percent from a year ago, and down  25.1 percent from two years earlier, when 7,327 foodservice businesses were offered for sale there.

BizBuySell.com analyzed broker-reported data from 195 restaurant transactions that closed during the third quarter, representing many, but not all completed deals.

Highlights of the data:

- The median price paid for restaurants on BizBuySell.com during the third quarter was $110,000, which was flat compared with the year-ago quarter, when 180 transactions were analyzed, and down 12 percent from the median sale price of $125,000 in 2010’s second period, as calculated from 199 transactions.

- The median asking price for all restaurants listed in the third quarter was $198,000, down from the median asking price of $199,999 a year ago. The median asking price for the second quarter was $199,000.

- The median annual revenue number associated with the restaurants sold in the third quarter was $360,000, down from the second quarter’s median figure of $370,278.

- The median annual revenue for all 5,488  restaurants listed during the third quarter was $428,645, and the median average multiple of revenue for an asking price was 0.56.

- The median average cash flow of restaurants listed was $89,043, and the median average multiple of cash flow for an asking price was 2.83 times.

- The breakdown of listings by region and the number of listings for the latest quarter: South, 2,176; Northeast, 1,585; Pacific, 912; Midwest, 412; Mountain, 403.

Contact Alan J. Liddle at [email protected].