A hospitality acquisition is priced like any small business and then decided by three things a discounted-cash-flow model never touches: who the landlord will deal with, who the licence is actually issued to, and whether the lender you want can legally fund the structure the seller needs.
Key takeaways
STEP 01 OF 10
Every other decision in this guide sits downstream of one choice: are you buying the shares of the corporation that holds the licence and the lease, or are you buying the restaurant's assets out of a corporation the seller keeps? A share purchase preserves continuity of the liquor or food-service licence issued to that corporate entity and often suits a seller chasing the lifetime capital gains exemption on qualified small business corporation shares. An asset purchase lets you leave undisclosed liabilities behind with the seller's corporation, at the cost of triggering a fresh licence application and, in most provinces, a sales-tax event on the taxable assets.
Neither structure is free of friction, and the two decisions in Steps 5 and 9 below will each pull toward a different answer — read the whole guide before committing to one in a letter of intent.
STEP 02 OF 10
Deavo's valuation methodology multiplies seller's discretionary earnings — "profit plus the owner's salary, perks, interest, depreciation and one-time costs" — by a sector multiple to produce a low-high range, sanity-checked against a revenue multiple before the range is shown (deavo.ai/valuation). Its six-sector median table puts restaurants & food at a median 2.1× SDE, labelled "illustrative medians for research context only — individual businesses vary widely, not an appraisal."
Separately, deavo's sector benchmark hub for hospitality & food gives a broader 1.5–3.0× SDE range and a 4–8 month typical time to sell, and names its own top diligence snag for the sector: lease & licence transfer — exactly the two items this guide spends the most time on (deavo.ai/learn/industry/hospitality). Treat the median as a single point and the band as the range around it — quoting one as the other misstates both.
STEP 03 OF 10
A restaurant's enterprise value can collapse to close to nothing if the space cannot go with it. Ontario legal guidance on assigning a commercial lease is blunt about the mechanic: where the lease is silent, the Commercial Tenancies Act presumes consent cannot be unreasonably withheld, but "many commercial leases do grant landlords absolute discretion," and in practice "the deal closes when the landlord signs" (treadstonelaw.ca).
The same guidance flags a point buyers routinely miss: "an assignment transfers the tenant's interest in the lease. It does not, by itself, end the original tenant's liability." Unless the landlord grants an explicit release — rarely offered — the seller stays on the hook to the landlord after closing, which is exactly why a seller's lawyer will push for a buyer indemnity as the fallback. Price the remaining term and renewal options as carefully as the trailing financials: a location with eighteen months left and no renewal option is worth materially less than the same P&L with a ten-year runway.
STEP 04 OF 10
A large share of Canadian hospitality turnover is franchised, and a share sale does not sidestep the franchise agreement the way it can sidestep some licensing questions — most agreements carry a change-of-control clause that treats a share sale the same as an asset sale for consent purposes. Ontario guidance on buying a franchise sets out the disclosure and consent mechanics under the Arthur Wishart Act, including the standard rescission and resale framework a buyer should confirm before relying on any exemption (treadstonelaw.ca/franchise-purchase-lawyer-ontario).
Build the franchisor's approval timeline into your closing schedule from day one, not week six — a franchisor that has not yet reviewed the incoming buyer's financials and operating experience is not a rubber stamp, and a transfer fee is standard practice rather than a negotiating error on the franchisor's part.
STEP 05 OF 10
Liquor and food-premises licensing is provincial, and the mechanics genuinely differ by jurisdiction and by licence type — this guide will not print a specific transfer process or fee because none is uniform across Canada, and inventing one would be worse than saying nothing. What is consistent across provinces is the underlying mechanic: a licence is typically issued to a named licensee, not to the physical premises, so keeping the same corporate licensee in place (a share sale) more often avoids a fresh application than swapping in a new corporate buyer (an asset sale) does — but "more often" is not "always," and some jurisdictions require a fresh application, inspection or hearing regardless of structure.
Confirm the actual rule with the specific provincial authority for the licence type in front of you before you remove your financing or licensing condition. Do not close on the assumption that a licence "comes with the business."
STEP 06 OF 10
On an asset deal, the joint election under the Excise Tax Act lets a seller and a GST/HST-registered buyer transact without tax on "all or substantially all of the property that can reasonably be regarded as being necessary for the recipient to be capable of carrying on the business" — but the relief does not cover everything (ETA s. 167(1)). Services still to be rendered by the seller, property supplied by way of lease or licence, and real property sold to a non-registrant buyer stay taxable even inside an elected deal.
Two practical consequences for a hospitality closing: the buyer's GST/HST registration has to be a closing condition, not an afterthought, because the election is unavailable where the seller is a registrant and the buyer is not; and goodwill is excluded from the GST/HST base entirely under a parallel provision, so do not tax-gross-up a goodwill allocation by mistake (ETA s. 167.1).
STEP 07 OF 10
Where Ontario staff continue working for the buyer after closing, the Employment Standards Act treats their tenure as continuous: "a person's length of employment with the seller of a business… is attributed, or 'flows through' to the purchaser." A ten-year line cook terminated a year after your purchase is entitled to notice calculated on eleven years of service, not one (ontario.ca). Underwrite that liability before you assume a lean post-close headcount is free.
If the departing owner wants to stay on as a paid manager, check the non-compete rule before assuming it is enforceable: Ontario's post-2021 ban on employee non-competes carries a sale-of-business exception that, as written, applies to a sole proprietorship or partnership sale where the seller becomes an employee of the purchaser — it does not, on its face, name a corporate share sale (ontario.ca). Get specific legal advice rather than assuming the standard restrictive covenant survives the exact structure you chose in Step 1.
STEP 08 OF 10
Provincial sales tax on a bulk asset sale runs three different ways. Saskatchewan requires the buyer to obtain a Clearance Certificate before closing on a bulk sale of assets — but explicitly not on a share sale — and warns that skipping it can make either party liable "for any outstanding taxes unpaid by the seller," covering every tax type under the province's revenue statute, not just PST (Information Bulletin PST-77, sets.saskatchewan.ca). British Columbia runs the opposite collection rule: a registered seller must collect and remit PST on the sale of taxable business assets, and a purchaser who skips the clearance certificate is liable only for the seller's outstanding collector balance (gov.bc.ca).
In both provinces, goodwill and intangibles are excluded from the taxable base, and neither province taxes a share sale at all. If your venue sits in a different province, treat this as the pattern to check for, not the answer — confirm the specific rule with that province's revenue authority before you finalize the price allocation.
STEP 09 OF 10
ISED's own program page states the maximum loan per borrower at $1.15 million: up to $1,000,000 in term-loan financing, of which no more than $500,000 can go to purchasing or improving leasehold improvements and new or used equipment, plus a further $150,000 for intangible assets and working capital, on top of a separate $150,000 line of credit (ised-isde.canada.ca). None of it can fund a share purchase: "you cannot use a loan to finance items such as share purchases or assets that a holding company acquires" (ised-isde.canada.ca FAQ).
That single rule reframes Step 1. If the seller needs a share sale for the lifetime capital gains exemption, the CSBFP is off the table for the buyer’s financing stack, and the gap has to be filled with a vendor take-back, conventional bank debt, or both. If the seller will accept an asset sale, the CSBFP becomes available for the eligible equipment and leasehold spend — commonly the single largest capital-stack lever available to a first-time hospitality buyer.
STEP 10 OF 10
Take a hospitality target with $310,000 of SDE. At deavo’s restaurant median of 2.1×, the valuation midpoint is $651,000, comfortably inside the broader 1.5–3.0× hospitality band of $465,000–$930,000. Say you agree a price of $650,000 for the assets. A main-street capital stack in the $200K–$1M band commonly runs roughly 25% buyer equity, 15% vendor take-back, and 60% senior debt blended between a bank and the CSBFP guarantee, underwritten at roughly 8.5% amortized over ten years (deavo.ai/financing).
Run the numbers: equity $162,500, VTB $97,500, senior debt $390,000. A $390,000 loan at 8.5% amortized monthly over 120 months carries a payment of roughly $4,835/month — about $58,025 a year. Against $310,000 of SDE, that is a debt-service coverage ratio of roughly 5.3×, well clear of the ≥1.25× DSCR lenders typically require on an SDE-underwritten deal in this size band. The margin looks comfortable on paper — recompute it against the actual seasonality of a hospitality business, where three slow months can do more damage to a monthly DSCR test than the annual average ever shows.
The pattern repeats across nearly every acquisition in this cluster: a seller wants a share sale to reach the lifetime capital gains exemption on qualified small business corporation shares, while the buyer wants an asset sale to leave undisclosed liabilities behind, avoid inheriting an unfavourable lease term on the corporate entity, and keep CSBFP financing on the table. There is no universal right answer — the choice trades a real tax benefit for the seller against real financing and liability exposure for the buyer, and the licence and lease mechanics in Steps 3 and 5 often decide which side has more leverage to hold its position.
A related PE guide walks through the tax and liability sides of that same decision in more general terms — worth reading before your letter of intent locks in a structure: choosing between a share deal and an asset deal.
No. ISED’s own FAQ states plainly that a CSBFP loan cannot finance a share purchase or an asset a holding company acquires, regardless of deal size or the buyer’s creditworthiness. You will need a vendor take-back, conventional debt, or equity to fill that part of the stack.
It avoids most of them, but not automatically and not everywhere. Depending on the province, skipping a required clearance certificate can leave you liable for the seller’s unpaid provincial sales tax, and employment continuity rules can attach staff tenure to your business regardless of deal structure.
Treat it as a starting reference, not a target. It is a median across Canadian restaurant transactions the tool has visibility into, explicitly labelled illustrative and not an appraisal — your specific lease term, licence status and growth trend will move a real offer up or down from that point.
The deal does not close on the terms you negotiated with the seller. Build franchisor approval into your closing conditions from the outset, and confirm the franchisor’s review timeline and documentation requirements before you commit financing or set a hard closing date.
A 30-minute call is enough to tell you whether AI pays for itself here.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email as each measure is published.
