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Sep052018

August 2018

 

Same Store Sales Trends

3Q Comp Estimate Best Since 1Q16

  • 3Q sales estimate for $1B+ chains could represent best results since 1Q:16.
  • Preliminary 3Q government data indicates restaurant sales continue to improve (+9.1% increase in July's advance Total Food Service & Drinking Place sales).

 

 

Source: RR Quarterly Same Store Sales & Hedgeye

 

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Promotional Composition

Value Reigns Supreme

  • Extreme value focus with 47% of $1B+ chain promotions offering some form of discount (highest level since 48% in 11/17).
  • The % mix of value promotions in August reached an LTM high in the family segment (51%) and was close to a high for sub chains (63%).

 

 

Source: RR Menu & Promotions Report

 

Economic Outlook

Huge GDP Growth Bolstered by All-Time High Consumer Confidence

  • GDP growth is expected to accelerate to +4.7% in 3Q.
  • Pros: increasing disposable income; low unemployment rate; strong consumer confidence (August reading highest since 11/00); and lower tax rates for 2018.
  • Cons: Higher gas, interest rates & commodity costs (although all were flat or down slightly on an absolute basis in August).

 

Source: Government Data

 

RR Resources

 

Research Notes                              Presentations           Unit Level Trends

Report Announcements            Insights                       Menu Pics

                                                                Industry Events

 

Key Cost Trends & Forecasts

Commodity Costs are Moderating & 2019 Outlook is Favorable

  • Commodity costs continue to moderate with the BLS Foodstuffs Index down -1.0% YTD August. Coffee and pork are at LTM lows. 
  • 2019 USDA outlook is favorable.

 

Source: RR Commodity & Labor Database

 

Source: NOAA

 

Franchisee EBITDA Valuations

Store-Level Valuations Holding Steady

  • August survey shows slightly positive trend for franchisee EBITDA valuations as an abundance of capital is partially offset by margin pressure and interest rate headwinds.
  • Valuations are expected to hold steady through year-end 2018.

 

Source: RR 1H18 Valuation & Finance Report

 

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Stock Valuations from Hedgeye Risk Management

Strong QSR Stock Gains Extend Lead Over S&P 500

  • RR's $1B+ Index rebounded sharply in August, led by strong QSR gains, with evidence of a very recent industry sales trend improvement.
  • In any case, YTD results have sharply outperformed the S&P 500 despite flattish sales trends for industry players during this period.
  • Very strong RR Growth Index results during August was driven by more buyout news (Zoes) which has been helping industry valuations.

 

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Marcus & Millichap Cap Rates

Strong Demand for This Asset Class Supports Lower Cap Rates

  • Cap rates continued to trend down in August and reflects strong demand for this asset class and flat interest rates for the month.

 

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Recently Completed Reports

 

Arbys     Taco Bell

 

2Q18 Same Store Sales        2Q18 Concept Updates

 

Get up to speed with a delivery leader

 

 

Special Order Report

  • Core brand equity around "Freaky Fast" delivery as the only national sub chain offering in-house delivery.
  • 2,755 units (55 company/2,700 franchised)
  • 142 new units projected FYE 2018 (1 company/141 franchised)
  • New Factory Design new build image represents a 25% cost savings.

Please pass on to your colleagues

 

Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research’s analysis and opinions are not a guarantee of the future performance of any company or individual franchisee.  RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2018.

 
 

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