• Macro-economic results continue to represent a major head-wind for restaurant stocks.
• While 2Q financial results for the public QSRs were OK, we suggest a review of current unit-level performance may provide important insight into the challenges that are weakening the franchise systems that are core to many of these public companies.
• 2H:22 EBITDA multiple outlook (-6% y/y decline) represents the biggest contraction since 1H:20.
• 2Q GDP decline of -0.9% represents the second consecutive quarterly contraction and is consistent with a slight +1% increase in personal consumption expenditures which is falling behind a supply shock driven +9% inflation rate.
• July’s restaurant stock performance suggests that investors called a bottom at the end of June.
• Unit-level buyers are increasingly wary of rising borrowing rates and deteriorating unit economics.
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