Insights

Damien Sanders recently graduated college with an economics degree, and now he works at Restaurant Research LLC. However, he didn’t start out as a hot shot Analyst – rather, he cut his teeth working at Zaxby’s & Bojangles during college, learning many life lessons along the way. In this Q&A, Damien explains why the fast-food industry provides such a good launching pad for young people prepping for a career…

The restaurant franchise finance asset class currently benefits from strong unit-level sales and food cost deflation. Loan collateral has held up well generally speaking and the economy & capital markets are certainly stronger than the Great Recession that started around 2008. In this post, we conduct a Q&A with the head of a prominent franchise finance group & present some supporting data about why it may be time for lenders to jump back into the pool.  

We had never heard of BIGGBY® COFFEE until a team member’s spouse declared: “BIGGBY® COFFEE is going to be the next Starbucks!” Naturally, that got our attention as this is not something you hear every day. We pressed Julie our “source” – why would she say this about Biggby’s?  

Wally just got back from Vegas where he attended the Restaurant Finance Monitor conference to escape the tyranny of raising his young children, get to a warm climate, shmooze, lose some money at the Casinos, and also take the pulse of the state of restaurant finance which he outlines in this post.

Hardee’s, a regional chain which is generally oriented towards rural, lower-income markets in the Southeast & Midwest, is well known for its made from scratch biscuits (breakfast drives almost half of sales); 100% Angus charbroiled burgers; and hand-breaded chicken sandwich & tender options. While Hardee’s strategy is well conceived to leverage its core competencies, the chain remains challenged by its value equation and geographic market/demo positioning during a period of significant stress on lower-income consumers.

Del Taco is the 2nd largest Mexican QSR, positioned around a wide variety of better-quality food (use of fresh ingredients represents a competitive distinction) offered for reasonable prices with convenient drive-thru access. While Del Taco enjoys strong concept fundamentals, the chain remains challenged to drive needed AUV growth especially at a time when its core low-income customers remain stressed by unfavorable economic conditions.

The average number of units operated by franchisees of the $1B+ Chains has increased from 5.4 in 2018 to 6.1 in 2022 which reflects the need for scale in the current high-cost operating environment.

Subway is the largest sub sandwich chain by far with an ad budget larger by multiples than the other sub chains and continues to make progress with its current brand repositioning. However, while Subway is working hard to improve its relevancy in a crowded field, the chain has a lot of work to recover 20%+ of domestic sales market share lost over the last 10 years to the $1B+ chains.

Denny’s unique “America’s Diner” brand positioning provides the promise of everyday value with craveable, comfort food served around the clock in a friendly and welcoming atmosphere. While Denny’s management team is executing well around a very solid strategy, the chain remains challenged to drive needed AUV growth especially at a time when its core low-income customers remain stressed by unfavorable economic conditions.

Buffalo Wild Wings enjoys a unique positioning as the largest sports bar brand (4th largest casual chain) which is famous for its wings flavored with 26 B-Dub sauces & seasonings in ascending order of heat. While BWW enjoys considerable brand equity as the largest and perhaps most iconic sports bar chain, there remains more work to convince young sports fans that the chain’s dining experience is worth the price premium over Wingstop delivery.