Restaurant Finance & 2H:22 Valuations

Mar 14, 2023 | Insights, Restaurant Research

Midcap Banner
Midcap Banner

Restaurant Finance Executive Summary

  • 2022 traditional restaurant financing volume of $13.4 billion represents a -25% y/y decrease after a record 2021 and was -15% lower than last year’s survey projections.
  • 25% of participating financiers expect to increase 2023 loan originations (vs. 2022) while 19% plan to cut back, resulting in an expected +6.6% net increase to $14.2 billion.
  • 2022 loan portfolio balance increased by +6.2% to $65.6 billion (record high) as higher net new originations more than off-set principal repayments.
  • Lenders indicate a modest deterioration in the financial condition of their QSR borrowers in 2022 (we illustrate with a underwriting model tracking a 2019 credit) but a slight improvement in FSR – QSR borrowers are still outperforming overall.
  • Interest rate spreads remain stable but borrowing indexes have increased dramatically over the last 9 months.
  • Leverage underwriting ratios remain conservative relative to 2019 (although significantly more favorable for QSR) with total debt ratios expected to tighten slightly in 2023.
Annual Originations 2023
Annual Originations 2023

2H:22 Valuations & Cap Rates Executive Summary

  • Aggregate franchisee unit-level EBITDA valuation multiples contracted for the second consecutive period and a 1H:23 EBITDA multiple outlook of a -4.5% decline would be the biggest contraction since 1H:20.
  • Aggregate cap rates for single-tenant net-leased $1B+ chain restaurant properties increased only +10 bps in 2H:22 but recent property price reductions are driving cap rates higher and transaction volume lower.
2H22 EBITDA Valuations
2H22 EBITDA Valuations
IDR-Finance-2H22-Valuations-2023-Outline-1

Free 3-Month Trial to View Premium Post

Order Report

Signup
NoBullEconomics
Restaurant Research

Email Sign-up

15 Second Posts

What is Fixed-Income Issuance Dominated by?

Total U.S. fixed income (FI) issuance declined -34% y/y to $8.8 trillion during 2022 as interest rates ramped up.

Bank Deposits Growing Much Faster than Business Loan Demand

Banks have been parking excess deposits in various forms of government debt that are subject to interest rate risk & in risky crypto bets. This is causing systematic risk.

Nerdwallet Survey Shows an Indebted & Very Stressed Consumer

Consumers are combating the higher price of living & higher interest rates by driving less, buying store brands & taking on more debt.

The United States of America is Worth Saving

Americans need to be reminded about our heritage as the single most productive nation as measured by GDP/person with a unique capability to bless the entire world if we can simply get back to business.

Should Private Banks Go Extinct?

Since the 2008 Great Recession, 134 banks with assets of $1.25 Trillion have been closed by regulators. At the same time, the Fed’s ballooning balance sheet now amounts to nearly 50% of total domestic bank deposits.

What Happened to Silicon Valley Bank?

Don’t assume that SVB’s difficulties are symbolic of the entire banking industry.

What Does the End of the Petrodollar Mean?

The Saudi minister of finance announced that the Kingdom was ending the petrodollar. “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal”. Yikes!

Senator Kennedy Schools Country on Economics 101

We have a choice of how to tame inflation, cut government spending, or throw people out of work.

Inflation is Marginalizing Purchasing Power from the Lower-Income Demo

As households with annual incomes >$70k drive 62% of total food-away-from-home sales, it is more important than ever to focus on this demo especially as spending from the lower-income demo slows.

A Look at Consumer Expenditures by Category

You can learn a lot about someone by how they spend their money…

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company