building bridges between franchisees, franchisors ...€¦ · ebitda multiple estimates by chain 4...
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
Industry Data Report
1H:20 Valuation & Finance Update
Report Highlights
➢ 1H:20 EBITDA multiple estimates (post G&A) for 45 chains based on survey data from 8 leading appraisal firms;
(2) a comparison of public restaurant company and private franchisee valuation multiples; (3) a summary of real
estate cap rate trends based on data provided by Marcus & Millichap; (4) an update on lending availability,
changes to underwriting standards, lending rates and borrower financial condition derived from a survey of
leading lenders; and (5) an overview of RR’s DCF valuation model useful for smoothing out temporary
disruptions.
Conclusions
➢ (1) While 1H:20 franchisee EBITDA valuation multiples declined 7.0% to 4.63x, it is 7.4% higher than the 12-
year low (4.31x) set in 2009 and only -3.9% below the 10-year average (4.82x); (2) full year 2020 restaurant loan
originations are expected to come-in -42.7% lower at $5.3 billion compared to initial expectations in January –
this would represent the lowest origination amount since 2011 ($4.6B); (3) 84% of the 38 survey participants
indicate that they are currently lending. Of those 32, only 9 have outlined lending terms for FSR borrowers
suggesting that the vast majority are not lending to this segment; (4) while loan underwriting standards are
relatively unchanged for QSR, FSR standards are significantly more stringent; (5) the public $1B+ chain
restaurant company valuation multiple and premium continued to expand due to strength in QSR, reaching the
highest level in at least 10 years; and (6) aggregate cap rates for single-tenant net-leased restaurant properties
decreased slightly as lower interest rates fully off-set an increased risk premium.
Table of Contents Pages
Estimated Unit Level Franchisee Enterprise Valuations
➢ EBITDA Multiple Trends 2 - 3
➢ EBITDA Multiple Estimates by Chain 4
➢ Factors Impacting Valuation Trends 5
Public Restaurant Company Valuations
➢ Ratio of Public Stock Valuation Multiples to Private Franchisee Multiples 6
➢ Public vs. Private Multiples by Chain 7
Marcus & Millichap Real Estate Cap Rates
➢ National Chain Net Lease Cap Rate Trends 8
Valuation Methodology
➢ Valuation Methodology 9
➢ RR Discounted Cash Flow Model 10
Restaurant Finance Update
➢ Restaurant Finance Update 11 - 12
Data in spreadsheet form available at http://www.ChainRestaurantData.com
Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of 1997,
electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are
violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial
gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2020 Restaurant Research® LLC. All rights
reserved.
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 2
Estimated Franchise Enterprise Valuations
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 3
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 4
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 5
Summary of Valuation Comments
Availability of
Capital
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Financing Terms ➢
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Unit Level
Economics
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Availability of
Units for Sale
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Survey Participant Contact Information Firm Contact Main Number Email
Source: Restaurant Research LLC June 2020 Valuation Survey
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 6
Public Company Valuations (EV/EBITDA)
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 7
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 8
Marcus & Millichap Net Lease Real Estate Cap Rates
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About the Contributing Firm: Marcus & Millichap which specializes in representing institutional and
private companies in the disposition of multi-tenant and single tenant retail properties.
For more information, please contact Hank Wolfer of Marcus & Millichap at (206) 826-5730
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 9
Valuation Methodology
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(1) Business Value is determined by using an appropriate multiple of adjusted EBITDA.
Some typical EBITDA adjustments include:
(2) Real Estate Value (land and building) is determined by:
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Example - Fee Restaurant Property
Business Value Real Estate Value
Sales Implied Rent/sales
Adjusted EBITDAR Implied Rental Income
Implied Rent Cap Rate
Adjusted EBITDA Real Estate Value
Multiple
Business Value Total Value
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EBITDA Mult.
$0 Terminal FCF $0
0.0% Terminal Cap Rate (3)
Terminal Value (4)
$0 NPV (FCF) $0
#DIV/0!
Base 2019 2020 (5)
2021 (6)
2022 2023 2024 2025 2026 2027 2028 2029AUV
Y/Y Change (2)
EBITDAR
G&A
Rent
EBITDA
CAPEX (7)
Taxes (8)
FCF
Margins
EBITDAR (9)
G&A (10)
Rent (10)
EBITDA
CAPEX (7)
(1) "Implied" Discount Rate = same value as the baseline EBITDA multiple.
(2) AUV growth rate based on 10-year same store sales average (Max 3%/Min 0%).
(3) Terminal Cap Rate = New Discount Rate - Growth Rate.
(4) Terminal Value = 2029 FCF/Terminal Cap Rate.
(5) Assumes dine-in restricted 60 days.
(7) CAPEX includes 1.75% for R&M and 2% for remodel expense and only R&M in 2020 & 2021.
(8) Tax rate assumes the maximum corporate tax rate and no state tax. 21%
2021 2022 2023 2024 2025 2026 2027 2028 2029
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%(9) Modify EBITDAR margin
(6) Click here to modify 2021 AUV assumption.
$0
(10) Click here to modify rent and/or G&A assumption.
Terminal Value (4)
EBITDA Multiple
Difference Between Baseline EBITDA Mult. Valuation and Current Discounted Cash Flow Valuation
EBITDA Multiple ValueClick here to modify discount rates
Click here to modify
growth rate
"Implied"
Discount Rate (1)
Adjusted EBITDA
Applebee's
Baseline Valuation (2019)
10-Year Unit-Level Free Cash Flow Valuation Model
Only Blue Cells Can be ModifiedCurrent Valuation (Discounted Cash Flow)
Discount Rate
Risk Premium
New Discount
Rate
AUV Growth Rate (2)
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 11
Restaurant Finance Update
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1H:20 Underwriting Ratios
Adjusted
Leverage
Funded
Debt/EBITDA
FCCR
(Pre. Dist.)
Loan to Value
QSR FSR QSR FSR QSR FSR QSR FSR
Low
High
Average
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Data, Analysis & Insight for a Stronger Industry Building Bridges between Franchisees, Franchisors & Financiers
IDR: Valuation & Finance Source: RR Estimates Page 12
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Survey Participants
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Visit www.chainrestaurantdata.com or contact us at
(860) 352-2198 or [email protected] to:• Ask us about custom research projects
• Inquire about RR Thermometer email marketing opportunities
Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of
1997, electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are
violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial
gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2020 Restaurant Research® LLC. All rights
reserved.
Sources: All data represents RR estimates which are derived from various private and public sources.
Disclosure: Restaurant Research LLC often sells report subscriptions to concepts under our coverage.
Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC
believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice
and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant
Research’s analyses and opinions are not a guarantee of the future performance of any company or individual franchisee.
RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report
available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide
an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business
judgment.
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