In a flavorful turn of events, 2024 is set to bring restaurant deals back to the table. Following a robust recovery in consumer spending on dining out post-pandemic, restaurant operators are becoming enticing targets for acquirers. The inflationary pressures that once dampened appetites are subsiding, offering eager sellers, including private equity owners, the chance to serve up sales or pursue public listings.
The statistics speak volumes – spending on food away from home surged 16% YoY to around $1.3 trillion in 2022, according to the U.S. Department of Agriculture. Despite challenges like rising ingredient costs and labor shortages, restaurant sales experienced an eight-month consecutive rise through October 2023. The hurdles posed by the pandemic are gradually fading, with food and labor costs stabilizing and wages seeing a significant drop in inflation.
The ingredients are aligning for a resurgence in deals, already evidenced by a significant uptick in 2023. After a lackluster 2022 with $1.4 billion in transactions, 2023 saw a twelvefold increase by September, per Dealogic data. Notably, Subway sealed a long-sought $9.6 billion sale to Roark Capital in August.
This optimistic trend is a beacon for other long-term investors in the restaurant industry. Private equity firms, having amassed various restaurant brands, are poised to capitalize on the market’s recovery. With interest rates peaking and markets bouncing back, acquirers, including buyout shops with ample dry powder, may seek to savor the opportunity. Additionally, companies like Panera, having filed confidentially for an IPO, signal a feast for restaurant owners in 2024. The stage is set for a delicious comeback in the world of restaurant deals.