Independently-owned supermarkets in NSW and VIC — IGA, Foodworks, and unaffiliated independents — are valued primarily on EBITDA, but the rent-to-revenue ratio is the single most important number in the deal. Buyers know that the real cost of owning a supermarket is not the purchase price — it is the ongoing occupancy cost. The multiple range is 2.5× to 4.0× EBITDA for well-structured businesses.
What the market is paying
| Business type | Typical multiple | Key driver |
|---|---|---|
| High rent (above 5% of revenue), thin margins | 1.5–2.0× EBITDA | Rent risk dominates the valuation |
| Moderate rent, IGA/Foodworks franchise, stable revenue | 2.0–2.5× EBITDA | Franchise support + manageable occupancy cost |
| Low rent, strong location, diversified revenue (deli, bakery) | 2.5–3.5× EBITDA | Premium margin structure + location |
| Owned premises, strong community position, long trading history | 3.5–4.5× EBITDA | Property ownership eliminates rent risk |
The rent-to-revenue ratio
Supermarket gross margins are typically 20–28%. After wages, utilities, and cost of goods, the net margin is thin. When rent exceeds 4–5% of revenue, the business is operating on a knife edge. Buyers will calculate the rent-to-revenue ratio before they look at anything else — and if it is above 5%, they will either walk away or offer a price that reflects the risk.
Franchise vs independent
IGA and Foodworks franchise agreements provide buying power, marketing support, and a recognised brand — but they also come with obligations. Buyers will review the franchise agreement carefully: the term, the renewal conditions, the territory rights, and the change-of-control provisions. A franchise agreement that terminates on change of ownership is a significant problem.
Value-added departments
Supermarkets with a deli, bakery, butcher, or prepared foods department generate higher margins than those selling only packaged goods. These departments also create a point of difference from the major chains that is difficult to replicate. Buyers will pay a premium for a supermarket with strong value-added departments and the staff to run them.
Owned premises: the premium asset
A supermarket that owns its premises is a fundamentally different asset to one that leases. Owned premises eliminate rent risk, provide security of tenure, and give the buyer a property asset alongside the business. These businesses attract the highest multiples and the broadest buyer pool — including property investors who see the business as a tenant in their own building.
