The new year has all the experts predicting 2012 restaurant trends. Nation’s Restaurant News published an article last week titled, "Industry Experts Forecast 2012 Trends" asking heavy hitters in the industry to share their expectations for the year ahead. Here’s the We Sell Restaurants take on the industry’s predictions and how these predictions might affect the restaurants for sale market.
Hudson Riehle, senior vice president of research for the National Restaurant Association says “it will continue to be a better environment than it was in 2008, 2009 and 2010.” What does that mean for those buying a restaurant? As restaurant brokers, we'll tell you to expect any restaurant for sale achieving better sales to deliver much stronger earnings to the bottom line. The past three years have been about controlling costs and margins. When top line sales growth hits, net profit margins are going to look very good. Ultimately, this will lead to higher pricing of restaurants for sale.
Nancy Kruse, President of The Kruse Company predicts growth around what she calls: premiumization, customization and miniaturization in the industry. Premiumization refers to upgraded offerings. Customization reflects a “have it your way” trend and miniaturization refers to small plates. All of these will affect restaurants for sale. As restaurant brokers, we anticipate that some tired old concepts that don’t fit any of these models (think buffet style restaurants) will face lower multiples and ultimately softer selling prices.
Bonnie Riggs, a restaurant analyst for The NPD Group forecasts, “Fast casual will remain hot. The segment’s year-to-year traffic rose 6 percent for the year ended Oct. 31.” We Sell Restaurants agrees with this analyst and we see this playing out in the restaurant for sale market with landlords giving preference to fast casual over other concepts when leasing a restaurant or replacing an existing operator.
In the same article, another industry executive, Darren Tristano, foresees that “consumers hesitant to spend want twists on the familiar, such as comfort foods with gourmet.” The restaurant for sale market is not as eclectic with proven concepts finding more traction than the unfamiliar is this restaurant broker's take on this trend.
When it comes to commodities, John Barone, president of Marketvision estimates that “beef prices will rise” and restaurants will experience “lower year-over-year corn and wheat prices, albeit these will be coming down modestly from record-high levels.” Those in the market to sell a restaurant will have already experienced commodity increases that cost precious margin in the past two years. This is reflected in the financials of any restaurant for sale. Those heavy on beef (think of the saturation in the gourmet hamburger market in the past two years) may find it a tougher market to sell if their primary costs go even higher.
Finally, president and chief executive of the International Franchise Association, Steve Caldeira, projects that “franchising is expected to grow in 2012, with, franchised quick-service restaurant sales increasing an expected 4.4 percent and franchised full-service restaurant sales expected to increase 4.2 percent in 2012.” Continued strength in the new franchise market trickles down to franchise restaurant resales. We Sell Restaurants continues to expect strong growth from existing franchise restaurants for sale in 2012 as they change hands.
That’s our take on the national forecast and the impact on the restaurant for sale market. Feel free to comment with your thoughts.