Restaurant Finance & 2H:21 Valuations

Feb 15, 2022 | Report Announcements

Restaurant Finance & 2H:21 Valuations – Key Points

  • RR’s Finance & Valuation report is based on survey responses (equally weighted) from 54 finance companies including traditional cash flow lenders, sale leaseback companies, SBA lenders and equipment finance companies.
  • 2021 traditional restaurant financing volume of $15.1 billion represents an +85% y/y increase (+40% on a 2-year stacked basis) and the first annual increase since 2016, driven by pent-up borrower demand & increased consolidation.
  • 2021 SBA loan volume for the $1B+ Chains should exceed $500 million (representing an all-time high).
  • 44% of participating financiers expect to increase 2022 loan originations (vs. 2021) while 18% plan to cut back (including some larger players), resulting in an expected -4% decrease to $14.5 billion.
  • 2021 loan portfolio balance increased by +6.0% to $61.2 billion (record high) as higher net new originations more than off-set principal repayments.
  • Lenders indicate a much stronger financial condition for QSR borrowers with FSR showing some improvement since July.
  • While $1B+ chain sales have fully recovered relative to 2019, rapidly rising food and labor costs represent significant headwinds for operators.
  • Leverage underwriting ratios remain conservative relative to 2019 (although significantly more favorable for QSR) but are expected to ease slightly in 2022.
  • 2H:21 valuation survey results indicate a further increase in franchisee EBITDA multiples with FSR outperforming QSR.
  • The 2H:21 $1B+ chain public restaurant company valuation multiple and premium continued to decline sharply due to normalizing EBITDA levels which more than off-set strong stock market appreciation.
  • Cap rates for single-tenant net-leased $1B+ chain restaurant properties declined despite higher interest rates.

 

IDR Finance & 2H21 Valuations 2022 – Report Outline

 

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