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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers

Industry Data Report

1H:20 Valuation & Finance Update

Report Highlights

➢ 1H:20 EBITDA multiple estimates (post G&A) for 45 chains based on survey data from 8 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; (4) an update on lending availability,

changes to underwriting standards, lending rates and borrower financial condition derived from a survey of

leading lenders; and (5) an overview of RR’s DCF valuation model useful for smoothing out temporary

disruptions.

Conclusions

➢ (1) While 1H:20 franchisee EBITDA valuation multiples declined 7.0% to 4.63x, it is 7.4% higher than the 12-

year low (4.31x) set in 2009 and only -3.9% below the 10-year average (4.82x); (2) full year 2020 restaurant loan

originations are expected to come-in -42.7% lower at $5.3 billion compared to initial expectations in January –

this would represent the lowest origination amount since 2011 ($4.6B); (3) 84% of the 38 survey participants

indicate that they are currently lending. Of those 32, only 9 have outlined lending terms for FSR borrowers

suggesting that the vast majority are not lending to this segment; (4) while loan underwriting standards are

relatively unchanged for QSR, FSR standards are significantly more stringent; (5) the public $1B+ chain

restaurant company valuation multiple and premium continued to expand due to strength in QSR, reaching the

highest level in at least 10 years; and (6) aggregate cap rates for single-tenant net-leased restaurant properties

decreased slightly as lower interest rates fully off-set an increased risk premium.

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

➢ RR Discounted Cash Flow Model 10

Restaurant Finance Update

➢ Restaurant Finance Update 11 - 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 2020 Restaurant Research® LLC. All rights

reserved.

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http://www.chainrestaurantdata.com/


IDR: Valuation & Finance Source: RR Estimates

Estimated Franchise Enterprise Valuations

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Summary of Valuation Comments

Availability of

Capital

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Financing Terms ➢

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Unit Level

Economics

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Availability of

Units for Sale

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Survey Participant Contact Information Firm Contact Main Number Email

Source: Restaurant Research LLC June 2020 Valuation Survey

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Public Company Valuations (EV/EBITDA)

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utline



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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 (206) 826-5730

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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 Implied Rent/sales

Adjusted EBITDAR Implied Rental Income

Implied Rent Cap Rate

Adjusted EBITDA Real Estate Value

Multiple

Business Value Total Value

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EBITDA Mult.

$0 Terminal FCF $0

0.0% Terminal Cap Rate (3)

Terminal Value (4)

$0 NPV (FCF) $0

#DIV/0!

Base 2019 2020 (5)

2021 (6)

2022 2023 2024 2025 2026 2027 2028 2029AUV

Y/Y Change (2)

EBITDAR

G&A

Rent

EBITDA

CAPEX (7)

Taxes (8)

FCF

Margins

EBITDAR (9)

G&A (10)

Rent (10)

EBITDA

CAPEX (7)

(1) "Implied" Discount Rate = same value as the baseline EBITDA multiple.

(2) AUV growth rate based on 10-year same store sales average (Max 3%/Min 0%).

(3) Terminal Cap Rate = New Discount Rate - Growth Rate.

(4) Terminal Value = 2029 FCF/Terminal Cap Rate.

(5) Assumes dine-in restricted 60 days.

(7) CAPEX includes 1.75% for R&M and 2% for remodel expense and only R&M in 2020 & 2021.

(8) Tax rate assumes the maximum corporate tax rate and no state tax. 21%

2021 2022 2023 2024 2025 2026 2027 2028 2029

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%(9) Modify EBITDAR margin

(6) Click here to modify 2021 AUV assumption.

$0

(10) Click here to modify rent and/or G&A assumption.

Terminal Value (4)

EBITDA Multiple

Difference Between Baseline EBITDA Mult. Valuation and Current Discounted Cash Flow Valuation

EBITDA Multiple ValueClick here to modify discount rates

Click here to modify

growth rate

"Implied"

Discount Rate (1)

Adjusted EBITDA

Applebee's

Baseline Valuation (2019)

10-Year Unit-Level Free Cash Flow Valuation Model

Only Blue Cells Can be ModifiedCurrent Valuation (Discounted Cash Flow)

Discount Rate

Risk Premium

New Discount

Rate

AUV Growth Rate (2)

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Restaurant Finance Update

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1H:20 Underwriting Ratios

Adjusted

Leverage

Funded

Debt/EBITDA

FCCR

(Pre. Dist.)

Loan to Value

QSR FSR QSR FSR QSR FSR QSR FSR

Low

High

Average

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Survey Participants

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Visit www.chainrestaurantdata.com or contact us at

(860) 352-2198 or [email protected] to:• Ask us about custom research projects

• Inquire about RR Thermometer email marketing opportunities

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 2020 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.

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building bridges between franchisees, franchisors ...€¦ · ebitda multiple estimates by chain 4...

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