new build ROI

New Unit Investment & ROI

Sky rocketing COGs & labor costs are driving sharply lower new build ROI which, in turn, is driving a move towards smaller footprint stores optimized for digital & off-premise as well as increasing use of ghost kitchens.

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RR Insights Journal – Dec

According to RR’s just released New Unit Investment Report, the sales-to-investment ratio for $1B+ chains declined dramatically in 2021 as higher construction costs (partially reflecting longer project completion times) more than off-set growth in new build AUVs.

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New Unit Investment & Franchise Fees 2020 – 2021

New Unit Investment Report highlights: (1) the sales-to-investment ratio for $1B+ chains continues to trend down after peaking in 2013 as higher construction costs have outpaced the growth in new build AUVs; (2) new build ROI is also pressured by declining unit level margins; (3) declining trends are offset by appealing franchisor development incentives; (4) RR’s New Build vs. Buy Ratio rose for the 4rd consecutive year given a decline in store level acquisition multiples; (5) cost effective conversions seem to be the way to go post-lockdown; and (6) 4 chains introduced new building prototypes.

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