How to Value a Cafe in New Zealand: Complete Guide

# How to Value a Cafe in New Zealand: Complete Guide

Whether you're looking at a cafe for sale in NZ or thinking about selling your own, the first question is always: how much is a cafe actually worth?

Cafe valuation in New Zealand follows well-established methods, but there are industry-specific nuances that can make the difference between overpaying by $50,000 or spotting a bargain. This guide walks you through everything you need to know.

Why Cafe Valuation Matters

New Zealand has one of the highest per-capita cafe densities in the world. The cafe and coffee industry contributes over $3 billion annually to the NZ economy. With so many cafes changing hands each year, having a reliable way to assess value is critical for both buyers and sellers.

A good cafe valuation helps you:

Negotiate from a position of knowledge, not guesswork
Secure financing — banks want to see that the purchase price is justified
Compare different cafe opportunities on an apples-to-apples basis
Identify hidden value (or hidden risk) that the listing price may not reflect

Step 1: Calculate Seller's Discretionary Earnings (SDE)

SDE is the gold standard metric for valuing small businesses in NZ, and cafes are no exception.

The SDE Formula

SDE = Net Profit + Owner's Salary + Owner Perks + Depreciation + Interest + One-off Costs

For a typical NZ cafe, the add-backs might include:

Owner's salary (often $60,000–$90,000 for a working owner)
Personal vehicle costs run through the business
Family members on the payroll who may not be replaced
One-off renovation or fit-out costs
Depreciation on coffee machines, kitchen equipment, and fitout

Example SDE Calculation

Item	Amount
Reported Net Profit	$45,000
Owner's Salary	$75,000
Spouse's wages (not replaced)	$25,000
Personal vehicle expenses	$8,000
One-off kitchen renovation	$12,000
Depreciation	$15,000
Total SDE	$180,000

Step 2: Apply the Industry Multiple

In New Zealand's cafe market, the typical SDE multiple ranges from 2.0x to 3.5x, with most cafes selling between 2.5x and 3.0x.

What Drives the Multiple Higher (Toward 3.5x)?

Prime location with high foot traffic (e.g., Ponsonby, Newmarket, central Wellington)
Long secure lease — at least 6+ years remaining including rights of renewal
Low owner-dependency — the cafe runs well without the owner present daily
Strong brand and online reviews — 4.5+ stars on Google with hundreds of reviews
Growing revenue trend — year-on-year sales increases over the last 3 years
Modern equipment — a well-maintained La Marzocca or similar commercial machine, commercial dishwasher, walk-in chiller

What Pushes the Multiple Lower (Toward 2.0x)?

Short lease (under 3 years remaining)
Owner is the head chef or barista and works 60+ hours a week
Declining foot traffic or local competition increasing
Ageing equipment that needs replacement soon
High staff turnover
Reliance on a single revenue stream (e.g., dine-in only, no takeaway or catering)

Typical Cafe Valuation Examples

Cafe Type	SDE	Multiple	Valuation
Small suburban daytime cafe	$80,000	2.0x	$160,000
Established cafe in good location	$150,000	2.8x	$420,000
Premium cafe with strong brand	$220,000	3.2x	$704,000
High-turnover destination cafe	$300,000	3.5x	$1,050,000

Step 3: Assess the Asset Base

Beyond the earnings multiple, consider the tangible assets:

Equipment and Fitout

A typical cafe fitout in NZ costs $150,000–$400,000 to build from scratch. Key items include:

Commercial espresso machine ($15,000–$30,000 new)
Grinder(s) ($2,000–$5,000 each)
Commercial oven, rangehood, and extraction ($20,000–$50,000)
Refrigeration (display cabinets, walk-in chiller, freezer)
Furniture, counters, POS system
Signage and branding

If the equipment is relatively new and well-maintained, it supports a higher valuation. If major items are nearing end of life, you should factor in replacement costs.

Stock and Inventory

Typically valued separately from the business at cost price. For most cafes this is $3,000–$10,000 in coffee beans, food supplies, packaging, and cleaning products.

Step 4: Evaluate the Lease

The lease is often the most critical factor in a cafe valuation. Key points to assess:

Remaining term: How many years left, including rights of renewal?
Rent as a percentage of revenue: Ideally under 10-12%. Over 15% is a warning sign.
Annual rent reviews: Fixed percentage, CPI, or market review?
Assignment clause: Can the lease be transferred to a buyer?
Demolition clause: Can the landlord terminate the lease for redevelopment?
Personal guarantees: What happens to these on sale?

A cafe with a 9-year lease at reasonable rent is worth significantly more than an identical cafe with only 2 years remaining.

Step 5: Look at the Non-Financial Factors

Location and Foot Traffic

Count the number of people walking past during peak hours. Is there parking? Public transport access? Are nearby businesses (offices, retail) bringing customers?

Online Presence and Reviews

Check Google Reviews, TripAdvisor, and social media. A cafe with 500+ Google reviews averaging 4.6 stars has significant goodwill that supports the asking price.

Staff Quality and Retention

Meet the staff during your visits. A stable, skilled team that will stay on after sale is worth a lot. High staff turnover is expensive — each barista replacement costs $3,000–$5,000 in recruitment and training.

Supplier Relationships

Good cafes have established relationships with local roasters, bakeries, and produce suppliers. These relationships often come with favourable terms and consistent quality.

Common Mistakes When Valuing a Cafe

Ignoring the lease risk — a cafe is only as valuable as its lease is secure
Not verifying the SDE — always cross-check with GST returns and bank statements
Overlooking deferred maintenance — that espresso machine might look fine but could need a $5,000 service
Comparing unlike-for-unlike — a breakfast-only cafe in Tauranga is not comparable to a full-day cafe in Auckland CBD
Emotional buying — falling in love with the vibe and overpaying

Get a Free Instant Valuation

Not sure what a cafe is worth? OpenBiz offers a free AI-powered business valuation tool that can give you an instant estimate based on industry data and comparable sales across New Zealand. It takes less than two minutes and requires no sign-up.

If you're browsing cafes for sale across NZ, explore the full range of listings on OpenBiz — filter by city, price range, and industry to find the right opportunity.

Summary

Valuing a cafe in New Zealand comes down to understanding the SDE, applying the right industry multiple (typically 2.5x–3.5x), and then adjusting for lease security, location quality, equipment condition, and brand strength. Take the time to do the numbers properly, and you'll make a confident, well-informed buying or selling decision.