- RR’s Finance & Valuation IDR is based on survey responses (equally weighted) from 48 finance companies including traditional cash flow franchise lenders, sale leaseback companies, SBA lenders, equipment finance companies and financial consultants/advisors.
- 2018 restaurant financing volume of $11.2 billion represents an -11.2% y/y decrease and the second consecutive year of declining volume that was below initial expectations – we estimate $15.6 billion in total financing needs for 2018.
- 2019 origination prospects are expected to come in slightly lower at $11.0 billion.
- The total financing portfolio outstanding grew +4% to $57 billion in 2018 as franchisors continue selling stores as part of their asset light model.
- Despite more lenders entering the space, LIBOR spreads were unchanged but borrowing rates rose sharply due to an increase in index rates.
- Private EBITDA unit level valuation multiples for large chains declined slightly and are expected to remain under pressure due to unit level margin challenges while the large deal premium compressed sharply.
- Public franchisor EV/EBITDA multiples edged higher relative to private franchisee EBITDA multiples and the public multiple premium is at the top of our historic range (reflecting an asset light model and buyout premiums paid by private equity buyers).
- Cap rates were unchanged at 6.0% as higher QSR cap rates were off-set by a decline in FSR.