There are many types of restaurant and different categories of purchaser, with entirely different requirements for the type of property they require and the leasehold terms they are prepared to accept. A valuer will only provide an accurate valuation if it reflects the wishes and returns required by the most likely type of bidder for a particular property (such as an owner/occupier, multiple operator or a franchise operator).
Unusually (and subject to reservations), capital valuations are generally made using the profits method of valuation and analysis, whereas rental valuations are made and analysed having reference to measured areas (although operators will still create business plans and decide whether to take or keep leasehold premises based strictly upon profit considerations).
This section should be read in conjunction with RICS guidance notes The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales and VPGA 4 Valuation of individual trade related properties. RICS guidance emphasises that a trade related property is usually valued by treating the physical property, the trade inventory and the market's perception of the trading potential for the business as single entity. It is the potential income from an operational entity that is the primary concern of a purchaser. Therefore valuers need to be actively involved in the market for this property class, as practical knowledge of the trading aspects of the business is fundamental to the analysis of the property's existing operation and trading potential.
Restaurants were previously grouped together with public houses and hot food takeaways as part of A3 under the Use Classes Order 1987. There are now separate use classes for public houses (A4) and hot food takeaways (A5). Care must be taken in reading leases and other documentation as to whether the permitted use relates to the previous Use Classes Order or the amended use class.
Valuers might encounter various types of restaurant and different aspects affecting value. Capital valuations and rental valuations outline valuation methods and valuation worked examples illustrate points from the main text.
Related RICS standards and guidance: The capital and rental valuation of public houses, bars, restaurants and nightclubs in England and Wales
Related RICS standards and guidance: Comparable evidence in property valuation
Related RICS standards and guidance: RICS Red Book
Related template: Restaurant valuation checklist
Related feature: Valuing trading potential