« February 2019 | Main | December 2018 »

January 2019


Same Store Sales Trends

Better than Expected Results Bolsters 4Q Comp Outlook

  • Better than expected reported comp results and improving forecasts bolstered 4Q outlook from December.
  • Of the 6 chains that have reported so far, 5 have exceeded initial forecasts & the forecast improved for 10 additional chains while only 2 were lowered.
  • Notably, the recent government shutdown delayed new retail sales data.



Source: RR Quarterly SSS (outline), Hedgeye & Census Bureau



Promotional Composition

QSR Finally Pivots Away from  Discounts In Contrast to FSR

  • QSR value mix decreased by 220 bps m/m to 51.4% in January (vs 60.7% during 1/18) with the use of fewer price specific promotions (although delivery discount deals were up sharply around the Super Bowl). Notably, discounts tend to be highest in January after the holidays.
  • QSR product innovation has accelerated over the last 2 months to a 19% mix (with a notable increase in the coffee/bakery segment) which is further evidence of the industry pivoting away from discounting. 
  • FSR value mix ramped up 510 bps m/m to 39.7% in January and is 360 bps above the LTM average as casual moves in the other direction of QSR. Innovation picked-up in both the family & fast casual segments.



Source: RR Menu & Promotions Report (Outline)


Economic Outlook

Government Shut Down Skews Data Which Remains Mostly Favorable

  • 4Q GDP growth outlook was trimmed again slightly to 2.5% as economic activity continues to decelerate from 4.2% in 2Q to 3.4% in 3Q.
  • Pros: increasing disposable income; lower tax rates; falling gas prices; and m/m decline in interest rates (FED becoming more accommodating). 
  • Cons: up-tick in unemployment rate (reflects impact of government shut-down) and waning consumer confidence (down ~13% from 10/18 peak), although these should be temporary given the sharp rebound in the stock market and drop in volatility.


Source: Government Data



Key Cost Trends & Forecasts

Food Cost Outlook Remains Favorable Despite Spike in Beef & Veggies

  • The BLS Foodstuffs Index declined for the 4th consecutive month on a y/y basis and the 2019 USDA outlook is favorable.
  • Notably, ground beef hit an LTM high in January although the 2019 outlook calls for -2% to -3% deflation. Fresh vegetable PPI surged +80% y/y, reflecting the cold snap in November (see weather chart below).


Source: RR Commodity & Labor Database (Outline)


Source: NOAA


Franchisee EBITDA Valuations

Unit-Level Valuation Multiples Starting to Stabilize

  • Slight pressure on franchisee EBITDA valuation multiples reflect the impact of rising wages on margins somewhat off-set by the recent m/m decline in interest rates.


Source: RR 1H18 Valuation & Finance Report (Outline)


Click Here to Order Report


Stock Valuations from Hedgeye Risk Management

Market Recovers from Sharp December Sell-off


  • Sharp stock market recovery in January recoups most of December's dramatic sell-off. 
  • While the RR $1B+ index is keeping pace with the S&P 500 so far, the smaller growth restaurant stocks were not as popular in January.



Marcus & Millichap Cap Rates

Cap Rates Revert Back to Mean

  • Cap rates jumped in January to the LTM average despite a decline in interest rates and a sharp drop in transactions (-43% y/y) reflects less interest in this asset class as the stock market rebounded. 






Recently Completed Reports


Dunkin     Sonic


Marketing Spend



Email RR for Pricing & Report Order Info


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 2019.


Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.