• 2Q quarter to date sales momentum on a 2-yr. stacked basis looks strong as the vast majority of restaurants are now open for dine-in and capacity constraints diminish across the country.
• Commodity Inflation Aggravated by Act of Terror.
• More sellers are coming to market, driven by improving sales & profit and by the prospect of a significant increase in the capital gains tax.
Preliminary 1Q:21 average comp growth of +9.7% for the $1B+ Chains (+7.5% 2-year stacked) is a testament to the industry’s tremendous resilience in the face of impossible circumstances. While easing restrictions and strong economy should help keep the sales momentum going, ramping commodity inflation and labor challenges represent significant headwinds.
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• Strong April comp prospects reflect that RR’s Intent to Eat Out Index increased +17.4% y/y in March and an overlap over last year’s lockdown period will provide a favorable y/y comparison, especially for FSR.
• A +40% jump in the March BLS Foodstuffs index and sharply higher lumber prices could impact both COGS & development costs.
• Preliminary 4Q:20 $1B+ Chains same store sales results were down -1.0% which is roughly in line with 3Q:20 results and reflects that October’s strength was mostly off-set by FSR weakness in November & December.
• 2021 sales have been improving due to: +14.4% January increase in disposable income ($600 stimulus checks); and easing dining restrictions. Going forward results should further benefit from another $1,400/person stimulus payment.
• Commodity costs escalated in February with several reaching LTM or multi-year highs.
Building Momentum should Benefit from More Value; More Value is Just What the Doctor Ordered; Recent GDP Expansion is Poised to Increase; Ramping Labor Costs, but Deflationary Food Prices; Improving FSR Valuations; FSR Rebound Drives RR Index’s Outperformance; Cap Rates Fell Sharply Because of Lower QSR Supply
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