(1) Who: You want to know the value of the restaurant; but this leads to a lot of questions:

• Who currently owns and/or manages the restaurant?
• Your current value with current ownership and management?
  • Value with a new restaurant owner with less experience?
  • Value with buyer like you with similar restaurant management experience?
  • Value with an upscale buyer who has the financial ability to build on what you have accomplished in your restaurant business?
• These WHO questions make a huge difference to the final appraisal.

(2) Normalized Net Income: I must understand what questions to ask to be able to determine the real 'Normalized Net Income.' This figure is seldom what you see in your year end accounting, which is generally calculated to determine the lowest amount of tax legally payable.

• Owners and families are often overpaid or underpaid depending upon individual tax situations.
• What would the owner have to pay someone to fill his/her position in the restaurant?
• There are about twenty more normalizing questions that must be answered and these can be different depending upon the answers given to previous questions. This is where experience counts.

(3) Risk: What are the possible risks to your restaurant?
No appraisal can be completed without properly understanding risk.

• How long is the restaurant lease?
• Are there reasonable options to extend the lease?
• If the owner of the building also owns the restaurant has the rent been paid at market rates?
• Are you in a one industry area, or is the area changing?
• Are industry trends your friend or enemy?
• Are there any Government regulations?
• Staffing?
• Competition and pricing challenges?
• Many more questions depending upon answers given.
• Changes to accessibility? Road changes?

(4) Leasehold Improvements: These need to be covered regardless of whether the building is leased or owned.
It is important that the right questions are asked in any comprehensive appraisal.

(5) Hard Assets: Determining fair market value.
Book value means nothing if we want to know the true value of the restaurant business.

• Restaurant Equipment
• Restaurant Inventory

(6) Intellectual Property: These are your restaurant's menus, recipes and most importantly the operating manuals for your business. This greatly affects value.

(7) Value of Cash Flow: This is calculated by finding the normalized net income then multiplying it by a ratio determined by risk, opportunity, and the intellectual property affecting the means to produce.