January 11, 2019
Royalty rates in the restaurant sector often refer to franchise royalty rates, that is royalty rates for a full and proven business concept including an established brand name. It is difficult to split the franchise royalty rate into its various elements. Here, we refer to royalty rates for restaurant brands only, without a business or franchise concept.
To achieve this, we have analysed a peer group of restaurants who operate owned restaurants only, and do not engage in franchising. The peer group includes 19 restaurant businesses in 8 countries. The 19 restaurants belong to the full-service restaurant category.
Accordingly, trademark royalty rates for restaurants typically range between 1% and 4% of revenues, the median royalty rate being 2%. The analysis reveals that the royalty rate is a function of both profitability and business size. A stand alone restaurant relies more on its location advantage and the reputation of its chef and menu. For a chain of restaurants, the brand name becomes more important. In restaurant businesses, trademark value accounts for 17% to 23% of enterprise value.
To learn more about trademark royalty rates and other valuation parameters , select your own peer group of comparable transactions in the restaurant sector on the MARKABLES platform, and conduct your own benchmarking analysis.