Restaurant-startup valuation: case of Russian companies

Abstract

The goal: To value Russian restaurant-startups taking into account the different risks in dining sphere and on the basis of the obtained results to formulate recommendations to investors and owners on the valuation of such companies. The objectives: • Identify the specific features of Russian startups in dining sector. • To analyze the possibility of using classical valuation models and to identify the reasons that are not allowing to use classical valuation models for the startups. • To apply the modified valuation method adjusted for risks to three different Russian startups. • To analyze the obtained results and draw conclusions. • To make recommendations on the use of model Main results: factors such as survival rates, institutional risk, the risk of losing a key person, the risk of changes in rental rates, the risk of obsolescence of the concept, the risk of occurrence of analogues, effect of illiquidity and brand power have been assessed as significant and used in the evaluation of companies. The owners of the companies felt the valuation close to reality. The value of the companies typically reaches a maximum in the second or third year of existence, and then decreases.