Thread by @SameStoreGuy

1/n Restaurant M&A thread. Things I always get asked

2/n Chick-fila: No. Not a franchise. You are a highly paid owner. Make $200k+ because Chick-fil-a kills it. When you are done working, nothing to sell. Thanks for your service

3/n $MCD McDonald's. Good luck with that. Too big and mature for you. No conflicting businesses. You also need to be an operator, not a financial buyer

4/n Subway? That seems cheap and easy? Yep, it is except you will make $30-$40k if you are lucky (in profits) Buying yourself a low-paying job

5/n Build or buy? Building carries a lot of risk. Many mature concepts are doing 1:1 sales to investment ratio. That's too low and probably equates to a 10 year payback. Therefore, M&A is the way to go

6/n Where to buy? Start with some brokers and look at some deals: Cypress, Trinity, Auspex run the medium sized deals. Northpoint, Duff & Phelps on the large side. Marshall Morgan, We Sell Restaurants, etc on the small end

7/n Restaurant valuation: Multiple x EBITDA after accounting for G&A (usually 3-4% of sales) and accounting for near-term remodels

8/n 6x EBITDA is my starting point for multiples. Run of the mill franchise with multiple units ... this is where we start. What drives higher/lower?

9/n Size determines a lot. 10+ units you probably start at 6x EBITDA. Financial buyers are interested starting at this level. You don't have to live in the same town to manage with larger footprint and more G&A available

10/n Less than 10 units and you have to figure out the buyer. 2 units and no other franchisees in town? You are stuck with guys owning other brands or the nearby Dentist. This drives multiples down to 2-3x sometimes, especially for less known brands

11/n $YUM brands? Taco Bell been hot for a long time but you don't have a chance at getting in. Multiples 10x sometimes these days. KFC likely 6-7x and Pizza Hut even lower. Lots of big operators in PH and lots of Capex leads to lower prices than you would think

12/n RBI? Popeyes been hot. BK not. Don't know anyone that wants to deal with RBI. Development agreements and blocking M&A if you aren't nearby. Good luck growing via M&A. BK multiples around 6 and Popeyes a turn and a half higher at least

13/n Inspire? Dunkin' doing well in right geographies. These guys start valuation at 100% of sales. Dunkin' guys think differently. NE have high margins and high sales. Other geographies not as much

14/n Sonic? Still quite a few large operators that need to get out. Been hot during COVID. Many of these guys still own their real estate too. That's probably the biggest opportunity here

15/n Debt? This is something many in the world miss. Many top-tier franchise brands can get 3-4x EBITDA in senior debt (that's still super cheap) Big enough deal and there is no recourse.

16/n Where to get started? Small? Find an established 2-3 unit in a brand you like and get an SBA loan. Big? Start looking at brokered deals and find yourself the right platform

17/n Other restaurant M&A questions of interest?