industry data report 1h:21 valuation & finance update
TRANSCRIPT
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
Industry Data Report
1H:21 Valuation & Finance Update
Report Highlights
➢ (1) 1H:21 EBITDA multiple estimates (post G&A) for 44 chains based on survey data from 7 leading appraisal
firms; (2) a comparison of public restaurant company and private franchisee valuation multiples; (3) a summary
of real estate cap rate trends based on data provided by Marcus & Millichap; and (4) an update on lending
availability, changes to underwriting standards, lending rates and borrower financial condition derived from a
survey of leading lenders.
Conclusions
➢ (1) Franchisee EBITDA valuation multiples continue to recover and are now only -2.9% below their 2H:16 peak
with QSR multiples at a new high and FSR multiples expanding at a faster pace than QSR (although still -13.7%
below the 1H:16 peak); (2) while large deal multiple premiums remain below the 1H:18 peak, premiums for deals
with $1M+ in aggregate EBITDA continue to rebound off the 1H:20 low; (3) the $1B+ chain public restaurant
company valuation multiple and premium declined sharply as normalizing EBITDA levels more than off-set
robust stock market appreciation, resulting in the convergence in QSR & FSR public company multiples to 28x;
(4) Marcus & Millichap data indicates aggregate cap rates for single-tenant net-leased restaurant properties
decreased slightly to 5.63% during 1H:21 from 5.73% in 2H:20 as strong demand and a reduced risk premium
more than off-set an increase in interest rates; (5) full year 2021 restaurant originations (excluding sale leaseback
financing) are expected to increase +19.1% compared to initial expectations in January; (6) only 37% of surveyed
financial institutions are currently lending to FSR borrowers; (7) borrower financial condition reflects current
sales trends (QSR outperforming FSR) with renewed concerns over a possible increase in dine-in restrictions
representing a headwind for FSR’s recovery.
Table of Contents Pages
Estimated Unit Level Franchisee Enterprise Valuations
➢ EBITDA Multiple Trends 2 - 3
➢ EBITDA Multiple Estimates by Chain 4
➢ Factors Impacting Valuation Trends 5
Public Restaurant Company Valuations
➢ Ratio of Public Stock Valuation Multiples to Private Franchisee Multiples 6
➢ Public vs. Private Multiples by Chain 7
Marcus & Millichap Real Estate Cap Rates
➢ National Chain Net Lease Cap Rate Trends 8
Valuation Methodology
➢ Valuation Methodology 9
Restaurant Finance Update
➢ Restaurant Finance Update 10 - 12
Data in spreadsheet form available at http://www.ChainRestaurantData.com
Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of 1997,
electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are
violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial
gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2021 Restaurant Research® LLC. All rights
reserved.
Repor
t Outlin
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 2
Estimated Franchise Enterprise Valuations
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Repor
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 3
Repor
t Outlin
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 4
Repor
t Outlin
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 5
Summary of Valuation Comments
Availability
of Capital
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Financing
Terms
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Unit Level
Economics
Availability
of Units for
Sale
Survey Participant Contact Information Firm Contact Main Number Email
Advanced Restaurant Sales, LLC
FranBizNetwork
Main Street Florida Realty, Inc.
National Franchise Sales
Newmark
Praetorian Group
Trinity Capital, a division of Citizens Capital
Markets
Source: Restaurant Research LLC June 2021 Valuation Survey
Repor
t Outlin
e
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 6
Public Company Valuations (EV/EBITDA)
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Repor
t Outlin
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 7
Repor
t Outlin
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 8
Marcus & Millichap Net Lease Real Estate Cap Rates
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About the Contributing Firm: Marcus & Millichap which specializes in representing institutional and
private companies in the disposition of multi-tenant and single tenant retail properties.
For more information, please contact Hank Wolfer of Marcus & Millichap at (425) 770-2495
Repor
t Outlin
e
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 9
Valuation Methodology
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(1) Business Value is determined by using an appropriate multiple of adjusted EBITDA.
Some typical EBITDA adjustments include:
(2) Real Estate Value (land and building) is determined by:
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Example - Fee Restaurant Property
Business Value Real Estate Value
Sales $1,000,000 Implied Rent/sales 7.5%
Adjusted EBITDAR $ 180,000 Implied Rental Income $75,000
Implied Rent $ 75,000 Cap Rate 6.00%
Adjusted EBITDA $ 105,000 Real Estate Value $1,250,000
Multiple 5.00
Business Value $525,000 Total Value $1,775,000
Repor
t Outlin
e
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 10
Restaurant Finance Update
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1H:21 Underwriting Ratios
Adjusted
Leverage
Funded
Debt/EBITDA
FCCR
(Pre. Dist.)
Loan to Value
QSR FSR QSR FSR QSR FSR QSR FSR
Low
High
Average
Repor
t Outlin
e
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 11
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Repor
t Outlin
e
Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 12
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Survey Participants
Industry Player Roster Changes New Entrants Expanded Business Exits
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Repor
t Outlin
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Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of
1997, electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are
violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial
gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2021 Restaurant Research® LLC. All rights
reserved.
Sources: All data represents RR estimates which are derived from various private and public sources.
Disclosure: Restaurant Research LLC often sells report subscriptions to concepts under our coverage.
Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC
believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice
and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant
Research’s analyses and opinions are not a guarantee of the future performance of any company or individual franchisee.
RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report
available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide
an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business
judgment.