Takeaways from the Restaurant Finance and Development Conference

By Mike McCrawPublished On: November 26, 2024

FOCUS Food and Beverage Managing Directors Mike McCraw and Jim Sowers recently attended the Restaurant Finance & Development Conference, a top industry event that attracts restaurant owners, operators, and financial executives from across the U.S. From sessions covering exit planning to growth strategies for acquisitions, the conference offered attendees time to catch up on the state of restaurants and capital markets.

While the RFDC’s packed agenda covered many topics and trends, a main theme surfaced throughout the sessions – after a tough year for the restaurant industry, owners and operators are optimistic for what’s to come in 2025. Sales are improving from the lows of the summer months. Interest rates are falling, making it cheaper to finance new locations and in turn, fuel growth. New concepts continue to emerge, appealing to consumers’ evolving tastes.

From an improving M&A market to tech tools leveraging artificial intelligence (AI), key takeaways from RFDC include:

Buyers are keen on franchise concepts

Buyers, particularly private equity groups (PEGs), remain focused on franchise concepts, a trend we expect to continue going into 2025. Scalability, brand appeal, a proven playbook, steady royalties – these attributes are attractive to investors, as they can leverage them to drive growth.

Look no further than Blackstone’s sizeable investments in the restaurant industry over the past year. In April, the private equity firm bought Tropical Smoothie Café for approximately $2 billion, followed by an investment in coffee chain 7 Brew. Continuing with its franchise focus, Blackstone recently announced its $8 billion acquisition of Jersey Mike’s.

Valuations have taken a hit, but quality assets continue to trade at a premium

Franchisee valuations dipped in the first half of 2024, ranging from 4x to 7x EBITDA, according to UBS analyst Dennis Geiger. QSR concepts have maintained stronger multiples compared to the casual dining set, largely due to QSR’s higher franchise mix, lower cost inflation risk, and potential for faster growth.

Despite a decrease in transaction multiples, well-performing brands and emerging, high growth concepts continue to command attractive purchase prices. With a less challenging lending environment and lower rates, more buyers may come to the table which could help drive an improvement in valuation multiples.

Tech investments are helping boost the bottom line

Restaurant operators continue to face headwinds, from rising labor costs to inconsistent store traffic. To combat these challenges, operators are investing in technology to maximize productivity and reduce labor costs – and many are reporting an improvement in operations post-pandemic.

Voice recognition technology is being rapidly adopted, leading to faster drive-thru times, improved order accuracy, lower labor costs, and increased upselling. Scheduling software is increasing worker satisfaction as workers’ shift preferences are more likely to be met and hours per work are maximized. Forecasting is also improving, with tools enabling stores to forecast product levels in 15-minute increments.

The outlook on M&A is cautiously optimistic

Save for select transactions, 2024 hasn’t been a blockbuster year for restaurant M&A. Owners have been hit by declining sales, persistently high food and labor costs, and increased competition. But inflation is easing, rates are decreasing, the election has passed, and buyers and lenders are looking to do deals.

Improving market conditions will take time to reach restaurants, namely because it will take time for consumers to bounce back from years of high costs. Owners that focus on optimizing operations, delivering value, and taking steps to build an enduring brand will be well-positioned to pursue a sale as the M&A market improves.

To learn more about the above topics, including restaurant valuation trends, and other sessions that were featured during the 2024 Restaurant Finance & Development Conference, please contact Mike McCraw at [email protected] or Jim Sowers at [email protected]

Mike McCraw, Managing Director and Food & Beverage Team Leader at FOCUS, is an experienced entrepreneur and investment banker and has over 30 years’ experience serving clients with mergers & acquisitions, advisory services, and business consulting. Prior to joining FOCUS, Mr. McCraw led the Consumer Team at Founders Investment Banking. While there, he helped launch a well-attended annual educational and networking event called the Multi-Unit Summit, bringing together top brand and industry leaders in a relaxed, high-quality environment. Mr. McCraw has also served as CFO for several multi-unit companies. In addition, Mr. McCraw started and led the Outsourced Services Practice Group at Warren Averett, one of the largest CPA firms in the Southeast. Before Warren Averett, Mr. McCraw co-founded and served as managing principal of the Birmingham office of a regional CPA and consulting firm. He also started and helped lead a lower middle market private capital group focused on adding value alongside successful entrepreneurs. Mr. McCraw has served as CFO/COO of a regional construction sub-contractor, CFO of a manufacturing company and Controller at two leading hospitals. Mr. McCraw is a Certified Public Accountant (CPA) and has a Master’s of Business Administration (MBA) from the University of Alabama at Birmingham. Mr. McCraw received his undergraduate degree in Accounting from Troy University, where he was quarterback on a National Championship team.