Same Store Sales Trends

Challenge is to Maintain 3Q20 Momentum

  • 46% of the 28 public $1B+ restaurant chains reported positive comps as industry players continued adapting and innovating during 3Q20.

  • Average reported comp recovery continued into October.

  • Declining food-at-home prices (relative to food-away-from-home) is worth noting given lingering (but improving) unemployment compounded by heightened economic stress driven by increasing government restrictions.

Promotional Composition

Value Represented by Gift Card Bonuses & Free Delivery

  • Sharp increase in other value promotions reflects gift card bonus offers (with 38% of the $1B+ chains providing some form of bonus) and free delivery (23% offering free delivery in November vs. 16% in October).
  • In any case, average promotional price points remain elevated at a time when more value could be a beneficial response to lower grocery store prices.

Economic Outlook

4Q Economic Rebound Continues to Build Momentum

  • 4Q:20 GDP outlook improved to +11.1% from +2.2% last month according to the GDP Now forecast due to stronger than expected growth in real gross private domestic investment, real personal consumption expenditures and real residential investment growth (higher housing starts).
  • Renewed economic stimulus talks could help further bolster the economic outlook.

Key Cost Trends & Forecasts

Commodity Prices Accelerate

  • Commodity costs accelerated in November with the BLS Foodstuffs index jumping +10.8% y/y to its highest level since May 2018.
  • 8 out of RR’s 13 tracked commodities are up significantly higher on a YTD basis with veggies, chicken wings, and corn all at LTM highs.

  • Total job openings equaled or exceeded total separations in August and September.

Franchisee EBITDA Valuations

FSR Valuation Outlook Recovers From Lows

  • Franchisee EBITDA multiple outlook improved significantly for FSR as survey participants turned neutral from bearish.
    QSR valuations are still strong (especially Popeye’s, Wingstop, Checkers, Sonic & Papa John’s), but may face headwinds going forward as the industry returns to normal and dine-in restrictions eventually ease.

Stock Performance

RR Index Surges in Broad Based Rally

  • The RR Index surged +15.9% in November in a broad based rally fueled by high hopes for vaccine progress and renewed stimulus talks, propelling the hard hit FSR index +24% higher.

Marcus & Millichap Cap Rates

Spreads Normalize after October Surge