Restaurant Investment

Restaurant Investment is altering the industry landscape. This is a good time to modernize your restaurant and consumer foodservice industry investment thesis (and there is a lot more afoot than delivery, ghost and cloud kitchens, 70 million Americans changing diets, food halls, alternative formats, alternative proteins, the increase in vegetarian and vegan consumers, urbanization, AI, etc.).

Whether the goal is to become the #1 foodservice company in a region, be the most successful restaurant IPO in history, or build brand equity globally, restaurant investment is a key element of the business plan to:

  1. Put the Guest and Employee Experience First: Investments into convenience engineering, satisfaction & sentiment measurement, and loyalty & retention programs. 
  2. Prioritize Operational Optimization Essentials: Efforts toward reducing labor costs, improving quality and productivity; revenue and yield management, CAPEX optimization, repairs and maintenance, and remodels. 
  3. Acquire And Develop New Brands: Fill significant holes in the brand portfolio; acquire emerging brands or developing concepts.
  4. Grow Core Business: Investments in experience design and new unit expansion (openings and location strategy). 
  5. Co-Investments for New Business Lines: Supply chains, logistics, distribution, and alternative formats are some investment options.
  6. Capitalize on the Technology of Tomorrow, Today: Restaurant tech investments to drive operational efficiency and productivity, enhance the guest experience, enable the team with the right tools and technology to perform at peak levels, reduce and eliminate friction and redundancies. Also mobile technology, predictive analytics, payment technologies, and workforce management.
  7. Measure and Manage What Matters Most: If you can’t measure it, you can’t manage it. Not all restaurant chains are making the right investments on goal cascading, real-time KPIs and dashboards, MBO and meritocracy.

The smart money is scanning the horizon not just for what is but what’s next and has undaunted determination to disrupt what’s now.

The following articles and research cover how restaurant CEOs are making investment decisions from acquisitions to CAPEX allocations to IPOs and taking on private equity partners.

Restaurant Mergers & Acquisitions

The restaurant M&A fever is catching across geographies, cuisines, categories, and ownership types — and burning white-hot from foodservice tech startups and corporate venture capital initiatives to budding emerging brands and even the consolidation of mature and distressed brands around the world.

Global Restaurant Valuation Trends

As Private Equity activity continues to flourish in the foodservice sector, restaurant valuation multiples have followed suit — rising even when deal volumes drop. Premiums for high-quality targets are on the rise, with valuations reaching their highest multiple (11.1x) since 2007. More about the valuation trends impacting restaurants here.

Restaurant CAPEX

The CAPEX-to-revenue ratio of publicly traded restaurants in the U.S. decreased in 2017 (for the first time since 2008) by 29%, and has remained at low levels since then. While the majority of businesses are decreasing CAPEX investments and debating over where they should be allocating funds — whether to infrastructure improvements or buybacks or dividends — market share winners are gaining traction with investments in guest experience enhancements, technology, infrastructure, and other competitive moat- building strategies.

Restaurant Investments in Alternative Formats

Who are the players growing the fastest? Disrupters. Among them, the rise of alternative formats that traditional industry tracking sources are failing to keep up with (in other words, consumption is increasing, just not in traditional formats and channels).

Most Common Commercial Due Diligence Findings

Through our extensive experience conducting restaurant commercial due diligence engagements, we’ve found that the same findings continue to crop up again and again.

Billions Fleeing Public Markets in Public-to-Private Deals

The pains of going public these days can be avoided while still gaining funding as there are trillions in private equity capital ready to be invested globally (and billions earmarked for foodservice).

PE Investment Overview for Restaurants

How could you grow your business with a $50m private equity investment? Would you expand into new markets, roll out the prototypes you’ve been dreaming of, or deploy new technology to make it even easier for diners to get your food? Here we offer a brief overview of PE funds operations, focusing on each stage of the deal.

How to Prepare for Private Equity Investment

Signing a deal with a private equity firm can, naturally, have profound effects on the organization operationally in addition to the impact on value creation strategies and resources. The process has its risks, and teams can often disagree on how to reach goals. Here’s a guide to help restaurant executives prepare for taking on a private equity investment.

Consolidation in the MENA Region

With the new normal in the GCC being received as unsettling to operators in the region, we foresee consolidation being a major theme across the restaurant industry — and that the biggest winner will be the group with the best acquisition strategy.

The Largest Restaurant Acquisitions in the Past 20 Years

Between 2004 and 2016, the number of restaurant acquisitions and mergers in the US increased by 86% and deals have become increasingly more strategic (rather than financial). We rounded up the restaurant M&A activity of the past two decades.

The Most Active Private Equity Firms in the Restaurant Industry

Private Equity has found a niche in the restaurant industry, and deals are increasingly cropping up in Asia, the Middle East, and South America. These are the most active PE firms in the restaurant industry.

Food Tech IPOs

Food tech is making its mark on the restaurant industry in a major way. In fact, we’re witnessing such a seismic change that the full ramifications of how tech will impact restaurants still remains to be seen. 

On the sell-side, with valuations at a ten-year high (U.S. restaurants EV/Sales averaged 1.5x in 2019 though the effects of the coronavirus will be negative), it could be a good time to evaluate an exit.

On the buy-side, it may be worth paying a premium for the right platform (in high-growth geographies and segments) and incremental add-ons. A creative and modernized investment thesis, due diligence, and custom market landscape insights are requisite for an acquisition and expansion strategy that leapfrogs the competition.

ABOUT AARON ALLEN & ASSOCIATES

Aaron Allen & Associates works alongside senior executives of the world’s leading foodservice and hospitality companies to help them solve their most complex challenges and achieve their most ambitious aims, specializing in brand strategy, turnarounds, commercial due diligence and value enhancement for leading hospitality companies and private equity firms.

Our clients span six continents and 100+ countries, collectively posting more than $200b in revenue. Across 2,000+ engagements, we’ve worked in nearly every geography, category, cuisine, segment, operating model, ownership type, and phase of the business life cycle.