Restaurant deals rose in 2010

Prices paid for restaurants also increased, BizBuySell.com says

The number of restaurants sold through BizBuySell.com and the median price paid for them picked up in 2010, according to the online marketplace.

The entire business-for-sale marketplace is expected to improve this year, officials from BizBuySell.com said, citing pent-up supply and demand and some easing of credit and lending restrictions.

“Spurred on by a strong showing in the fourth quarter, the business-for-sale market showed some promising signs of recovery heading into the New Year,” said Mike Handelsman, group general manager for San Francisco-based BizBuySell.com.

One of the key drivers behind the rise in the number of business deals closed in 2010 “was that business sellers were more realistic about their business valuations,” he said.

But while the median sale price for all categories of businesses sold at BizBuySell.com in 2010 dropped 6.3 percent year-over-year, to $150,000, the median sale price in the restaurant category actually increased 9.5 percent, to $115,000.

Brokers reported closing 842 restaurant transactions in 2010, up 5.1 percent from the 801 deals they said they completed in 2009, BizBuySell.com said. In 2008, brokers reported closing 1,126 restaurant deals.

The average quarterly number of restaurants listed for sale at BizBuySell.com dropped 12 percent to 5,442 in 2010, compared with 6,182 the year before, the website said. The recent high water mark — in terms of average quarterly listings of U.S. restaurants for sale at BizBuySell.com — came in 2008, when 7,064 restaurant businesses were listed for sale, up 45.2 percent from 2007.

BizBuySell.com analyzed broker-reported data from the 842 restaurant transactions that closed in 2010, representing many, but not all of the completed deals on the website.

Highlights of the data:

• The median asking price for all restaurants sold in 2010 was about $138,500, up 6.5 percent from the median asking price of $130,000 in 2009, but still down 18.3 percent from 2008’s median asking price of $169,450.

• The median annual revenue of the restaurants sold in 2010 was $350,735, down 1.1 percent from $354,662 in 2009 and down 5.2 percent from $369,216 in 2008.

• The median average cash flow of restaurants sold in 2010 was $67,558, and the median average multiple of cash flow for an asking price was 2.24 times. That compared with 2009’s and 2008’s median average cash flow of $68,000 and $75,131, respectively, and median average multiple of cash flow for an asking price of 2.57 times and 2.49 times, respectively.

• The breakdown of last year’s broker-reported restaurant deals through BizBuySell.com by region and the number of closed deals: South, 419; Northeast, 150; Pacific, 146; Midwest, 72; and Mountain, 55. The South, Northeast and Pacific regions also claimed the three highest numbers for closed deals in 2009, with 362, 170 and 150, respectively.

Contact Alan J. Liddle at [email protected]