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2010 Restaurant Finance Conferernce: Chain Restaurant M&A Talk Hot

|Includes: CMG, DIN, DRI, EAT, JACK, McDonald's Corporation (MCD), MRT-OLD, MSSR, PNRA, RT, RUTH, SONC, TXRH, WEN, YUM

We just returned from the 2010 Restaurant Finance and Development Conference. We will compose a longer, more detailed blog post, but did wish to highlight a few themes:

(1) the conference was bigger and more diverse than last year. It seemed that the number of franchisees showing off their brands had multiplied by a factor of four from 2008/2009 levels.

(2) the bankers and PE firms were present in force... they say money is available...and they are all looking for primo investments--above $5-10M EBITDA, 5 years of operation or more, multi markets etc. It raises the specter though: if no one wants to lend to slowly growing small chains, how will they ever become bigger chains? 

(3) On the merger and acquisitions front, there was considerable self marketing by the M&A advisory justify "higher" price multiples paid in 2010. Money avaialble for lending and number of lenders competing is up and has a relationship to selling price. 

(4) P&L squeezing continues: restaurants are looking for every way possible to find cost savings...and cost effective sales and marketing strategies.

(5) Restaurant Chains that franchise still have a "premium" and highly valued...interesting that franchisors are more highly valued publicly than bigger franchisees that are publicly traded...large franchisees have territory limitations.


John A. Gordon

Pacific Management Consulting Group

Disclosure: none