Restaurant Finance & 2H:20 Valuation Update

Feb 25, 2021 | Report Announcements

  • RR’s Finance & Valuation report is based on survey responses (equally weighted) from 50 finance companies including traditional cash flow lenders, sale leaseback companies, SBA lenders and equipment finance companies.
  • Report highlights: (1) 2020 traditional restaurant financing volume of $7.9 billion represented a -24% y/y decrease, reflecting diminished financing demand driven by government COVID-19 restrictions; (2) 61% of financiers expect to increase 2021 originations resulting in an expected $1.5 billion (+18% y/y) increase to $9.3 billion; (3) 2020 loan portfolio balance decreased by -5.0% to $55.7 billion as lower net new originations were not enough to off-set principal repayments; (4) loan portfolio default rates depend on FSR exposure which fortunately is limited; (5) leverage underwriting ratios have tightened considerably – especially for FSR; (6) 2H:20 valuation survey results indicate a broad-based improvement in franchisee EBITDA multiples; (7) the 2H:20 public restaurant company valuation multiple doubled on a strong rebound in stock prices in anticipation of normalizing EBITDA levels; (8) cap rates for single-tenant net-leased restaurant properties increased slightly for QSR and held steady for FSR on limited transaction volume.

Restaurant Finance & 2H20 Valuations – Report Outline

  • The SBA remains a very important source of funding for new franchisees, some of whom will become the multi-unit operators of tomorrow.
  • RR’s SBA Lending Database provides 11 years of data (2010 – YTD Sep. 2020) covering 7,200 loans for 41 $1B+ Restaurant Chains.
  • Data includes total annual originations, estimated portfolio balances, average loan size, interest rates (7a only), and charge offs for both the 7(a) and 504 programs.

SBA $1B Chain Restaurant Loan Data 2010 – 2020 Outline

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