s, depreciation, and amortization) multiple of recent private acquisitions in the fast food segment of the foodservice industry.
Although the largest fast food chains continue command a higher multiple to EBITDA, the maturity phase of an industry can be indicated by the deterioration in multiples of the weaker players. It is unusual in the United States to have so many public companies selling at multiples below the mean acquisition multiples of privately owned restaurant companies.
The dichotomy in opinion between the investment community and the executives of the publicly traded fast food companies is further exemplified by instituted share repurchase programs over the past year. Clearly, the executives of the publicly traded fast food chains believe that private investors are basing their decisions on erroneous valuations.
Trend sales growth in the restaurant and fast food segments of the foodservice industry has slowed in recent years from the rapid pace of the period extending from the 1960s through the mid-1990s. In the contemporary period, a significant portion of the growth in the fast food segment of the foodservice industry is being derived from international sales rather the traditionally large increases in domestic sales. The current worldwide credit crunch raises questions as to whether sales growth will slow further in the domestic markets. One school of thought is that many larger publicly traded chains may benefit from the credit crunch because smaller chains likely will find access to funds for development to be problematic, causing it more difficult for those chains to expand. Further, during a period of restricted capital access, smaller chains are less likely to compete for key real estate locations. Thus, smaller chains may be forced to curtail their expansion plans.
An analysis of the fast food segment of the foodservice industry in the United States is necessary to assess the segment's stage of ...