Gelato and ice cream businesses occupy a specific niche in the Australian hospitality market — high foot traffic, strong brand recognition, and a product that people genuinely love. But the financials behind the counter tell a more complicated story, and buyers know it.
What gelato businesses actually sell for
Gelato and ice cream businesses are typically valued on Seller's Discretionary Earnings (SDE) — the owner's total economic benefit from the business, including salary, superannuation, and personal expenses run through the business. The multiple range is 1.5× to 2.5× SDE, which is lower than many owners expect.
The reason for the conservative multiple is seasonality. A gelato business that generates $180,000 SDE in a good year may generate $90,000 in a bad one. Buyers price this volatility into the multiple. A business with consistent, year-round revenue — perhaps supplemented by catering, wholesale supply, or a second product line — will attract a higher multiple than a pure summer-dependent operation.
What buyers look for
- Rent as a percentage of revenue. The single most important number in any hospitality business. For a gelato shop, rent above 12% of revenue is a problem. Above 15% is a deal-killer for most buyers. The business may be profitable, but the margin for error is too thin.
- Lease length. A gelato business with a strong location and a short lease is not worth much — the location is the asset, and without lease security, the buyer is taking on significant risk. Minimum three years remaining, with options, is the standard expectation.
- Consistent revenue across seasons. Three years of monthly revenue data tells the story. Buyers want to see whether the business has a genuine off-season strategy or whether it simply closes or runs at a loss for four months of the year.
- Supplier relationships and recipes. If the gelato is made in-house, the recipes and production process need to be documented and transferable. If it is supplied by a third party, the supply agreement needs to be transferable to the new owner.
The franchise question
Several gelato brands operate as franchises in Australia — Gelatissimo, Trampoline, and others. Franchise resales are subject to franchisor approval and territory restrictions, which limits the buyer pool and can affect the price. The franchisor's consent to transfer is a condition of settlement, and the timeline for obtaining that consent needs to be built into the sale process.
Realistic expectations
A well-run gelato business in a good location, with consistent revenue, a long lease, and clean financials, will sell. The buyer pool is smaller than for other hospitality businesses — gelato is a specialist operation that requires specific skills — but it exists. The key is pricing the business honestly based on the actual financials, not the potential of the location or the owner's optimistic revenue projections.
