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The U.S. restaurant inventory won't decline

January 26, 2012

Analysis of:McDonald's Profit Rises 11%, but Investors Fret Over 2012 | www.nytimes.com

There are almost 1 million food and beverage venues in the U.S., meaning you can get something to eat almost anywhere. But that complicates matters for an industry based on growth. Despite some analysts’ hopes, we don’t feel that flat venue expectations are a positive driver of same store sales.

Chain Restaurant Earnings Recap, Q2 2011

August 8, 2011

Analysis of:McDonald's Same Store sales Rise 5.1% on China | www.bloomberg.com

With a global financial crisis apparently underway, whats going on in the restaurant sector regarding revenue and earnings? Matters right now are better than one would think.

Steakhouse Conundrum

July 8, 2011

Analysis of:Sector Snap: Restaurants mixed after downgrade | finance.yahoo.com

This week, Goldman Sachs downgraded virtually the entire restaurant sector, citing overvalues shares and uncertain future demand.We do see some more granular trends: steak centric restaurant concept same store sales rates are outperforming other concepts, due to improved business travel and other factors, too. But at the same time the same store sales trend is improving, beef costs have risen.

YUM's Little Sheep Acquisition: Peek at Store Level Economics

May 17, 2011

Analysis of:US Fast-Food Giant Yum Bids for Chinese Chain | www.nytimes.com

YUM recently acquired the balance of the Little Sheep chain, the Chinese chain of hot pot restaurants. Little Sheep's unit level economics is strong and has a long runway for growth.Its company economics are differently focused from US based franchisors as there is more money to be made from running company operated stores.

Restaurant IPO, Arcos Dorados (ARCO) Economics Snapshot

April 13, 2011

Analysis of:McDonald's Operator Arcos Seeks Twice Chain's Valuation | www.businessweek.com

The largest McDonald's (MCD) franchisee Arcos Dorados (ARCO) IPO is pricing on April 13 with trading on April 14th. The assumed PE valuation is above that of MCD, but its store and franchising economics aren't up to MCD levels yet.

Private Equity and Restaurants: Motivations, Results thus far

March 23, 2011

Analysis of:Sun Capital Gets 13X Return After Bruegger's Turnaround | blogs.wwsj.com

Private equity firms are into the restaurant space big time and will soon exceed the publicly traded count ranks. There are complex motivations underway, and its too early to call it a success. We see about a 30/40/30 success/cant tell/failure distribution thus far, and success seems to depend on the brand rather than the implied leverage.

Chain Restaurant Fundamentals Update, February 2011

February 4, 2011

Analysis of:YUM Puts Long John Silver's and A&W on the Block | dealbook.nytimes.com

With much chain restaurant earnings and divestiture news lately, we take the opportunity to note some broader themes underway. We are particularly concerned about long term sales and earnings gains assumptions at some companies, especially Darden, given unfavorable restaurant supply and demographic trends.

Selective 2010 Chain Restaurant Sales Momentum Gains and Other Notes

December 30, 2010

Some chain restaurant operators were able to get some forward momentum in 2010. The most sustained improvement was at a company you probably would not suspect, Biglari Holding's Steak N Shake.

Chain Restaurant Sales Pops: Who/What/Where/When/Why

August 9, 2010

Analysis of:New Drinks Help Lift US Sales for McDonald's | www.nytimes.com

McDonald's (MCD) released nice monthly sales today, but a few other operators generated legitimate sales "pops" in the last two years. Two Pizza operators generated a second quarter of follow-on trends.

Retail and Restaurant Valuation Distortions

June 3, 2010

Analysis of:Heard on the Street: PetSmart's Self-Depreciating Valuation | online.wsj.com

The Wall Street Journal on May 29th discussed the effect of depreciation expense capital spending decisions and how it will affect earnings and valuations, highlighting mature retailers. But, one must look closely at the whole picture. This viewpoint holds for both retailers and chain restaurants.

Denny's : Past and the Future

April 19, 2010

Analysis of:Denny's Slams Investors Leading Proxy Fight | dealbook.blogs.nytimes.com

With the Denny's proxy fight underway, we need to examine the past as to some clue as to how the future should be played out. Denny's lost a tremendous amount of momentum in the late 1980s and 1990s, and the long transition needed isn't consisent with the high tension/high pressure Wall Street environment.

CKE Restaurants Buyout: Reason for the Wrinkle

April 7, 2010

We thought yesterday it seemed a pretty safe bet now that THL Partners will pickup CKR Restaurants at the end of the go shop period today. But, another bid has emerged. There are interesting questions going forward in terms of CKE debt service, outyear P&L effects, and as a benchmark to other chain restaurant M&A..

CKE Restaurants Buyout, Questions Going Forward

April 6, 2010

Seems a pretty safe bet that THL Partners will pickup CKE Restaurants at the end of the go shop period today. The CKE transaction sets a datapoint for future chain restaurant M&A, and raises some questions going forward.

Chain Restaurant Sales and Earnings Trends, March 2010

March 10, 2010

Analysis of:February Sales Rose 4.8% at McDonald's | www.nytimes.com

Some familiar chain restaurant operators maintain sales and earnings momentum.The QSR subsector is generally weak and will remain so until employment picks up, but some consumer segments are feeling better and buying, and a wide swath of fine dining and casual dining operators are trending less negative, or positive.

2010 Chain Restaurant Expectations

January 26, 2010

Analysis of:US Sales Continues to Weigh on McDonald's | www.nytimes.com

McDonald's actually had a reasonable quarter, with both US and global same store sales results positive. But it took a big push on $1 items to do so. Getting positive sales in the US is very difficult, and should not be expected as a sector for some time. Those that do will have balanced marketing campaigns, talking to both value and higher margin products. And others will have substantial "run room", less than national chains with new territories to develop, and not on TV competing on price.

High Stakes Burger King Remodel Work In Progress

October 9, 2009

Analysis of:Burger King's New Restaurant Design | councils.glgroup.com

Burger King (BKC) needs some big news to reverse recent same store sales declines. It has long been considered a class b operator, with substandard sites and buildings. It has highlighted its so called 20/20 remodel template. Since BKC is about 90% franchised, it must go forward carefully with required big investments since capital market access is difficult. In addition, the size of the investment--$300 to $600K, will be it difficult to grind out a payback quickly.

What's the Story with Starbucks Price Increase?

August 24, 2009

Analysis of:Starbucks Price Increase: Will the Consumer Pay More? | www.nytimes.com

Did Starbucks really execute a price increase, or was it another goal? We feel the action was more of a rebalancing, and was done to protect margins, in the out periods.

Jamba: Food Expansion Will Take Time

August 24, 2009

Analysis of:Jamba Juice Launches Food Menu | www.suntimes.com

With a new CEO and management team in place, Jamba is working to expand its menu offerings so it is not perceived as a "snack only" destination, and to generate incremental profit flow-through. While we give the new team credit for trying, expanding into a non-core offering will be the most expensive and time consuming pathway to success.

Fast Food Fading: Not Quite

July 28, 2009

Analysis of:Fast Food Fading? | www.forbes.com

The Forbes article overstates the QSR sector slowdown. Their relative customer traffic position has faded even since 2008 (which was not a good year), but it is not true to indicate that nothing is working. One must examine the components of same store sales to see the pieces. The business press often focuses onto bumper sticker phrase analysis. In general, new news, product/value and strength of the marketing plan are essential elements for any kind of traffic stability.

Tim Horton's vs. Dunkin: long way to go

July 15, 2009

Analysis of:The Morning Doughnut? The Choices Are Getting Complicated | www.nytimes.com

Building a restaurant chain in a new market takes alot of time and effort.   Re-franchising from one brand to another might be a fast way of building QSR market share. CIT's survival is important to the franchisors.

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