Restaurant deals are making a comeback. In part, this is because of the restaurants that went public several years ago amid a flurry of IPOs have watched their valuations drop. These restaurants have struggled to grow beyond their core region and to compete with newer or larger players.
The industry has also become more challenging. People are increasingly eating at home and a rising minimum wage is making business more costly. The promotional environment, which started several years amid a drop in beef prices, makes it harder to earn a profit. Scale helps with the buying power of food and cash to invest in increasingly important digital capabilities and mobile payment systems
To date, corporate acquirers have spent $11.7 billion on restaurant acquisitions, compared to the average of $2 billion they had spent yearly since 2008, according to Dealogic.
Activists agitating in the multi-concept companies like Darden have left, leaving these companies both stronger and with the flexibility to pursue deals. Meanwhile, European investment fund JAB is leading an arms race to build a coffee and breakfast empire.
Recent deals include JAB's purchase of Panera Bread, Darden's acquisition of of Cheddars Scratch Kitchen and Restaurant Brands International's acquisition of Popeyes Louisiana Kitchen.
Private equity buyers:
Private equity deals have also picked up after a slow-down the last couple of years. So far, private equity firms have spend $4.5 billion on restaurant deals this year, more than double the $1.4 billion they spend in 2016 entirely, according to Dealogic. With private equity funds sitting on cash and weary of investing in traditional retail, the industry is one of the few in retail that is relatively defensive against Amazon.