Why Cafés Don’t Sell for High Multiples (Australia & U.S.): And Do Franchises Do Any Better?

If you’ve built a great café—good foot traffic, strong reviews, loyal customers—you might assume you’ve got something that will sell for a tidy sum.

But when it comes time to list, reality hits: multiples for cafés are notoriously low, in both Australia and the United States. In most cases, sellers struggle to achieve more than 1x to 1.5x SDE (Seller’s Discretionary Earnings), even if the café looks successful from the outside.

Let’s unpack why that is—on both sides of the Pacific—and whether franchises really change the game.

🌏 Same Story in Both Markets

Cafés in Sydney, Melbourne, or Brisbane face nearly identical valuation constraints to those in Seattle, Portland, or LA. Despite different tax systems and cultures, the buyer mindset is eerily similar.

Here’s what consistently keeps multiples low:

1. 🥱 Low Barriers to Entry = Easy Substitution

Whether you’re in Bondi or Brooklyn, it’s relatively cheap to start a café:

Lease a space

Buy second-hand equipment

Hire staff

Design your own brand

A buyer doing their homework might say:

“Why should I buy yours for 1.5x earnings, when I can lease the place next door, fit it out for less, and launch my own café from scratch?”

That’s the killer question. And it often tanks negotiations.

2. 🤝 Owner-Dependency Kills Transferability

Many cafés are built around the owner’s personality, presence, and daily involvement. Regulars know your name. You make the best flat whites or pour the best latte art.

But that personal charm doesn’t transfer.

If a buyer steps in and can’t match that vibe—or if key staff walk when you do—the risk of revenue drop is high. And buyers price in that risk with a lower multiple.

3. 🍳 High Revenue, Low Margin

A café might turn over $15K–$20K per week, which sounds impressive. But after:

Casual staff wages

Rent and utilities

Cost of goods (food + milk = ouch)

Sunday penalty rates (Australia) or rising minimum wages (U.S.)

…you’re often left with modest profit. In both countries, profit margins are frequently below 10%, and SDE might sit at $80K–$150K for an owner-operator.

Buyers aren't paying 3x that. They’re hoping to earn a living—not buy a passive income stream.

“The gravity in the room when talking about multiples is this: how many years is a buyer willing to work before they make a profit themselves?”

One year? Maybe two. That’s why 1x–1.5x is the practical range.

4. 📉 Short Leases and Fit-Out Depreciation

A big chunk of café “value” is often sunk into:

Expensive fit-outs (which buyers discount heavily)

Leases that may be short, overpriced, or hard to transfer

Intangible goodwill (which can disappear the moment you leave)

Even a beautiful café with $250K worth of equipment might only have $30K–$50K of resale value in a buyer’s eyes—because they’re budgeting to change it anyway.

5. 📉 Limited Scalability

Cafés don’t scale easily. You can’t double sales without doubling seats, hours, or staff.

So unless the business model is replicable or multi-site, buyers treat it as a job, not an investment—and price it accordingly.

☕ Do Franchises Do Any Better?

Sometimes. But not always.

✅ Where Franchises Help:

Recognised brand = instant foot traffic

Training and systems = lower perceived risk

Supplier arrangements = potential cost savings

Marketing support = more visibility

These factors can push valuations slightly higher—often 1.5x–2.5x SDE, especially for well-known chains or high-volume sites.

❌ Where Franchises Struggle:

Tight margins due to royalties and marketing fees

Limited autonomy – buyers can't pivot the menu, pricing, or brand

Still reliant on owner effort in many cases

Franchise saturation in some areas reduces uniqueness

A franchise café that nets $120K for the owner might still sell for only $180K–$240K, depending on lease length, location, and transfer support from the franchisor.

In short, a franchise doesn’t guarantee a premium multiple—it just makes the business easier to transfer. That’s worth something, but not everything.

💬 Final Word: Cafés Are Built to Run, Not Flip

Cafés can be joyful, social, and profitable businesses to own and operate. But they are rarely high-exit plays.

If you’re in the café game:

Pay yourself well while you run it

Build systems to reduce your daily workload

Keep your lease transferable

Don’t expect a windfall sale

And if you are thinking of selling—go in with clear eyes and clean numbers. That’s your best shot at a smooth, realistic exit.