The pandemic is over but not for some businesses that continue to feel the effects—and this impacts valuation. A good example is the limited-service restaurant space—fast food, pizza, coffee shops, and the like.

New normal: During a BVR webinar, Lynton Kotzin (JS Held) discussed the trends that were triggered—or accelerated—by COVID-19 and that have upended operations at limited-service restaurants and will continue for the foreseeable future. For example, the revenue mix has changed significantly, with revenue from delivery orders being a much bigger piece of the pie (no pun intended). It was thought that this would be incremental revenue, but it didn’t work out that way, Kotzin noted, so it has impacted profits.

Also, the pandemic accelerated drive-thru business, which shows no signs of reverting. A Chick-fil-A in Atlanta will be building a two-story, four-lane drive-thru to handle the expected volume.

This has cash-flow implications that need to be considered in a valuation.

Triple whammy: Kotzin also discussed the impacts of inflation and changes in demographics that, on top of COVID-19, have disrupted the limited-service restaurant business. Fast-food patrons, especially younger ones, appear to prefer speed and minimal personal interaction when ordering food. Inflation has greatly impacted the cost structure, so the question of whether that can be passed on to customers becomes an issue.

A recording of the webinar is available if you click here.