Restaurant valuations decline to their lowest levels in four years

BVWireIssue #80-1
May 6, 2009

Restaurant valuations declined to their lowest levels in four years and cap rates continued to rise to their highest levels in recent history. This turn of events reflects a perfect storm of deteriorating sales and store profit margins (driven by increasing commodity and labor costs), falling real estate prices, tighter credit markets and fewer lenders, data from Restaurant Research LLC’s 6th Annual Restaurant Valuation Trends Industry Data Report show. The report—which outlines EBITDA multiple estimates on 30 restaurant chains based on data provided by seven appraisal firms, responsible for approximately 5,500 store valuations over the last 12 months—show that the casual dining segment, not surprisingly, was hardest hit and has the worst outlook. Indeed, the outlook over the next 12 months remains bearish as rising food and fuel costs continue to weigh on operators and consumers alike while credit market tightness continues.

Interested in finding out more about the restaurant marketplace? Log on to Pratt’s Stats® for transaction data relating to SIC 5812 (Eating Places) to glean invaluable insights on this industry. In addition, BVR will also host a 100-minute teleconference on restaurant valuation on Thursday, August 6, featuring Edward Moran and Kevin Yeanoplos.  More information can be found here.

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