KBRA Releases Research – Restaurant ABS Trends: Whole Business Transaction Operators Face Inflationary Challenges

KBRA releases research covering inflationary challenges and responses in the restaurant whole business securitization (WBS) sector.

The restaurant sector faces high inflation, tight labor markets, reduced margins, supply shortages, and an uncertain economic environment after navigating pandemic-related restrictions. In facing these headwinds, many restaurant operators in the WBS space continue to adopt strategies that help drive revenues, manage expenses, and respond to changing consumer behavior. These strategies include a continued focus on menu simplification, hours of operation, improved kitchen utilization, and off-premise dining—meals ordered from the restaurant but consumed elsewhere.

Key Takeaways

• Inflation is impacting food prices, but not equally. Year-over-year price increases for food-at-home (i.e., groceries) are higher compared with food-away-from-home prices (i.e., restaurants).
• WBS backed by restaurant brands have posted continued systemwide sales (SWS) growth in 2022, with securitization debt service coverage ratios decreasing somewhat during the same period but remaining generally healthy.
• Restaurant operators are combatting inflationary pressures and labor shortages by focusing on a variety of strategies: off-premise dining, sourcing and distributing labor efficiently, better utilization of the kitchen and restaurant layout, menu simplification and diversification, and leveraging aggregator and brand-owned apps.

Click here to view the report.

Related Reports

• An Overview of the Whole Business Securitization Market
• Quick-Service Restaurants Serve up Strong Pandemic Performance
• Key Deliverables: Restaurants Move to Expand Online Delivery

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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