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Restaurant Business Purchase Valuation Trends

Restaurant business purchase trends have improved, but you have to know wheree to look for buyers

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Independent Restaurants, 2011 Expected Developments

Independent Restaurants, 2011 Expected Developments

While the publicly traded and big chain restaurants get most of the trade press attention, the fact remains that a majority of restaurant businesses in the US remain  “independents.” Here are some notes and factors underway that will affect 2011: Slow growth, at best: a tide of returning to normal upper end business travel has […]

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Chain Restaurant Sales and Profitability Update , February 2011

A number of influnces and developments in the restaurant business sector are underway. The article hights fundamentals developments.

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Franchise Purchase Due Diligence, Part 2

Franchise Purchase Due Diligence, Part 2

In item 20 of the FDD, closely examine the so called franchisee churn rate–the number of company owned and franchisee units that have opened, closed, or transfered over the last several years, versus the total company unit size. Too many closures or transfers is bad–its a sign of stress and turmoil. Generally, franchise owners do […]

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Earnings and Valuation Distortions, Part 4

Earnings and Valuation Distortions, Part 4

With company operated restaurant margins optimally in the 20-25% range (McDonald’s (MCD) and Chipotle (CMG) are industry leaders), and franchising profit margin at around 70-80%, refranchising seems like an easy decision. But which throws off more free cash flow? It will be interesting to watch YUM and Jack in the Box (JACK) long term as […]

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Earnings and Valuation Distortions, Part 3

Earnings and Valuation Distortions, Part 3

Retail businesses and chain restaurants battle minute by minute for customer attention and to make a splash. Too old of a store base means something is wrong—the company is in cash cow mode, or it can’t find sites, or that its new stores aren’t economically viable. In the chain restaurant arena, refranchising is underway in […]

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Earnings and Valuation Distortions, Part 2

Earnings and Valuation Distortions, Part 2

Depreciation is a non-cash expense (but still a charge to earnings) that is a proxy for capital assets charges. On the sources and uses of cash schedule, depreciation is an add to arrive at free cash flow, or roughly, cash flow from operations less capital spending. The problem is that a decline in depreciation expense, […]

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Earnings and Valuation Distortions, Part 1

Earnings and Valuation Distortions, Part 1

On May 29th, in his well written Financial Analysis and Commentary column, John Janarone of the Wall Street Journal discussed the variability of depreciation expense and the outlook for earnings, for various retailers, such as PetSmart (PETM), Best Buy (BBY), Barnes and Noble (BKS), among others. It highlighted a mature retailer, PetSmart, and the premise […]

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Restaurant Sector: Survival and Potential Conflicts, Part 4

Restaurant Sector: Survival and Potential Conflicts, Part 4

Traditional Industry Conflicts Due to the fairly difficult nature of the business, some traditional lines of conflict between elements of business and society routinely emerge: Restaurant owners /operator vs. government and regulation: as noted earlier, restaurants are very highly regulated. One visit from the Board of Health can shut a restaurant and result in loss […]

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