During a recent webinar on valuation issues in the restaurant industry, Franz Ross (KeyBank) advised experts to consider the impact of food trucks. While still a minuscule segment in 2017, food truck revenues are expected to hit $2.7 billion in five years, a compound growth rate of 33%. Also, adding a food truck to a brick-and-mortar restaurant is a relatively easy way to increase revenues per square foot, he points out.
In an update on the industry, Ross also mentioned that:
- Fast casual is the leading segment—expect to see a 2017 sales increase of 10% versus 4.3% industrywide (this segment includes Panera Bread, Chipotle, Jimmy John’s, Boston Market, Shake Shack, and Fuddruckers to name a few). The higher growth rates combined with lower failure rates of franchises means this group would probably have lower cap rates and higher EBITDA multipliers than other segments, he says.
- Pratt’s Stats has greatly improved the details of its transaction data (such as rent), which helps a great deal in a restaurant engagement.
- Experts should carefully examine leasehold terms (e.g., rent, assumability, parking) when valuing a restaurant.
Ross specializes in the valuation of real estate with a significant business component, such as restaurants, hotels, convenience stores, golf clubs, power plants, and the like.
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