How to Value Your Hospitality Business: Real Insights for Operators and Owners
Valuing a hospitality business is part science, part art—and the truth is, most operators don’t fully understand how it's done. You might be running a highly profitable café, restaurant, or QSR outlet, paying yourself well and enjoying a comfortable lifestyle. But when it comes time to sell, raise funding, or attract investment, the valuation might not reflect what you believe your business is worth.
In this article, we’ll explore how hospitality businesses are valued, what multiples really mean, why reaching £1 million in EBITDA changes the game, and how you can take strategic steps to increase your business’s market value—whether you’re looking to sell now or just want to build toward long-term success.
Why Business Valuation in Hospitality Is More Art Than Science
The value of your hospitality business is more than just numbers—it’s based on perception, risk, and market appetite. Unlike some industries with predictable, recurring revenues, hospitality businesses face seasonality, local economic shifts, and customer trends that change fast.
There’s often a disconnect between:
Lifestyle businesses that give owners a solid, steady income
Growth-oriented businesses that can achieve life-changing valuations on exit
Both models can be successful. But they’re valued very differently.
Understanding the Basics: Profit Multiples and EBITDA
When investors or buyers look at your business, they typically use a multiple of profit—most commonly EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation). EBITDA is often preferred because it strips out financing and accounting differences, making it easier to compare businesses.
Here’s the basic valuation formula:
Business Value = EBITDA × Multiple
The multiple depends on many factors, including business size, stability, growth potential, risk, and market comparables.
Why Larger Profits = Larger Multiples
It may seem counterintuitive, but higher-profit businesses don’t just get more money—they get better multiples. Here’s why:
Lower Risk: A business generating £1M+ EBITDA is seen as more mature and stable.
Scalability: Larger businesses often have multi-site operations, making them easier to roll out regionally or nationally.
Professional Management: Bigger firms are more likely to have costed management structures in place, reducing reliance on founder-operators.
Better Handover: A more robust operation makes transitions smoother for buyers or investors.
📊 Typical Multiples in the Market
Sub-£1M EBITDA businesses: 3–4× EBITDA
£1M+ EBITDA businesses: 6–10× EBITDA
High-growth brands with strong rollout potential: 12–14× store-level EBITDA
During the pre-COVID years, it wasn’t unusual for fast-growing concepts with clear expansion strategies to command up to 14× store EBITDA. Post-COVID, those numbers have come down somewhat (7× is a more common starting point now), but strong brands still command premium valuations.
Why Lifestyle Businesses Are Often Undervalued
If you’re a founder-owner pulling in £300k–£500k in profit annually, congratulations—you’re running a solid, cash-generative company. But if that profit includes dividends instead of a proper salary, or you’re covering several roles yourself (e.g., chef + ops manager + director), your EBITDA isn’t fully “costed.”
That’s a red flag for investors or acquirers. Why?
Because the profit isn't replicable without you in the picture. If a buyer needs to hire three people to replace you, their profit will drop—and so will the valuation.
👉 Pro tip: Pay yourself a realistic market salary. It creates a more transparent profit figure and boosts buyer confidence.
Breaking the £1M Barrier: The Tipping Point for True Value
Once your business hits £1 million in EBITDA, it becomes part of a very different conversation. It signals to buyers that:
You’ve proven your model at scale
The business can operate without founders in day-to-day roles
There’s a professional structure in place
At this level, institutions (like banks or private equity firms) become more willing to fund transactions. It also opens the door to higher multiples, bigger acquirers, and a wider market of potential buyers.
Of course, reaching £1M in EBITDA is no small feat—but it’s the benchmark where valuations often become life-changing.
Recent Examples: Big Valuations in UK Hospitality
Two recent transactions illustrate this:
GAIL’s Bakery was valued at over £300M
Loungers (owner of Lounge & Cosy Club) was recently taken private at a valuation of £350M
These brands weren’t just profitable—they had growth stories, replicable formats, and strong operational backbones.
You don’t need to be the next GAIL’s to build something valuable. But the principles still apply: scalability, clear margins, professionalised operations, and a growth roadmap.
What’s Holding Back Valuations?
Here are some common factors that depress valuations for smaller hospitality businesses:
Single Location Dependency
Buyers view single-site businesses as higher risk due to lack of diversification.Founders Wearing Too Many Hats
If your profit depends on you being a chef, GM, and bookkeeper—it's not transferable.Uncosted or Unclear EBITDA
If you’re mixing dividends, owner perks, or not paying yourself a full salary, your accounts will look artificially inflated.Inconsistent Financial Reporting
Sloppy or unclear numbers can drive away serious buyers—even if the business is performing well.
How to Increase the Value of Your Hospitality Business
If you want to build a more valuable business—whether for sale, investment, or simply stronger cash generation—here’s where to start:
✅ 1. Professionalise Your Operation
Structure your team so the business can run without you. Introduce clear roles, responsibilities, and documented processes.
✅ 2. Fully Cost Your EBITDA
Pay yourself a market-rate salary and remove “founder fluff” from the accounts. Present clean, realistic financials.
✅ 3. Focus on Margins
Improve your gross profit margin through smarter purchasing, tighter stock control, and pricing strategies. Even 1–2% improvement can add tens of thousands to your bottom line.
✅ 4. Expand Carefully
Scale where you have brand recognition or proven demand. Clustered growth in regions can create marketing and supply efficiencies.
✅ 5. Use Tools to Increase Efficiency
Platforms like Percy help streamline procurement, lower COGS, and increase profit—pushing you closer to that £1M EBITDA goal.
A Long-Term Bet on the Sector
Despite recent challenges, hospitality remains a powerful sector for growth. As automation increases across industries, people may have more leisure time—and hospitality businesses are uniquely positioned to capture that spend.
Compared to the US or Australia, UK hospitality spend per capita still has room to grow. Long-term tailwinds, changing lifestyle preferences, and post-COVID consumer behaviour suggest a positive outlook for the sector.
Final Thoughts: Build Now, Sell Smart Later
Whether you’re dreaming of a big exit or just want to build a more stable, profitable business, understanding valuation dynamics is essential. The closer you can get to the £1M EBITDA mark, the broader your market becomes and the higher the value you can command.
At Percy, we help hospitality businesses become more profitable through smarter purchasing and better margin control. Use the calculator on our homepage to estimate how much you could save—and how much closer that might take you to your valuation goals.