RR Report Announcement: 2H23 Finance & Valuations

Feb 20, 2024 | Insights, Restaurant Research

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Weak 2023 Originations are Poised for 2024 Rebound

  • $9.8B in total financing originations to $1B+ restaurant chains during 2023 represented a -28% y/y decrease and a -30% decline in origination projections made by survey participants at the beginning of 2023.
  • 2024 originations are forecasted to increase +18% y/y to $11.5B (in-line with 2019), with 63% of financiers planning to increase their 2024 loan originations and 8% planning to cut back.
  • The aggregate 2023 loan portfolio balance for the national lenders of $1B+ restaurant chains decreased by -0.8% to $65.9B as principal repayments exceeded net new originations.
  • Lenders indicate a modest improvement in the financial condition of both their QSR & FSR borrowers.
  • While interest rate spreads have not changed since 2021, borrowing index rates have increased dramatically since 2H22.
  • Underwriting ratios remain conservative relative to 2019 (although significantly more favorable for QSR).
  • 2023 SBA loan originations made to $1B+ Chains declined -35% y/y even though these loans continue to experience extremely low loss rates/charge offs.

Annual Restaurant Originations

2023 Valuations Improve But Face 2024 Unit Level Headwinds

  • Aggregate franchisee unit EBITDA valuation multiples increased slightly to their highest level since 2H21.
  • 1H24 EBITDA multiple is forecasted to decline -2.7%, reflecting increasing unit level margin pressure (slowing sales & rising labor costs) aggravated by high borrowing costs.
  • The 2H23 $1B+ Chain public restaurant company valuation multiple & premium bounced off the 1H23 lows.

2H23 Restaurant Valuations

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